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From The Sunday Times

April 29, 2007

Will HIPs pack a real punch?

The watered-down home information packs that will be mandatory from June 1 focus on energy-efficiency ratings. Jon Neale looks at the implications and puts three British homes to the test

On a remote ridge in the Welsh Marches, a surveyor is hard at work, tape measure in hand. But this is no routine survey. He is calculating the energy efficiency of a five-bedroom farmhouse in this isolated valley hidden in the Shropshire Hills.

For those expecting space-age equipment and thermal cameras, the process is disappointingly mundane. It involves measuring walls, checking boiler serial numbers and inspecting loft insulation. But it will become a common sight in every corner of England and Wales from June 1, when anyone selling their house must commission a home information pack (HIP) or face a £200 fine.

The introduction of HIPs represents a profound change in the way we buy and sell our homes. For the first time, the government will not allow anyone to market a house or flat without a set of documents prepared upfront. The pack will include land-registry documents, local searches, evidence of title and the most important document of all: an energy performance certificate (EPC). This will rate homes from A to G, depending on how well they generate and conserve heat, in a system similar to that used on white goods. A, of course, is the best rating possible; G is the worst.

Why are HIPs happening, and how will they and the energy rating affect homeowners? Will they affect property prices? Five weeks before their introduction, property professionals as well, as large sections of the public, are concerned about their potential effect on the housing market. Is that concern justified?

Originally, the packs were flagged as a way to speed up the process of buying and selling houses. It was a laudable aim, augured in Labour’s 1997 manifesto. The government estimates deals that fall through – whether from gazumping, gazundering or delays that trigger a collapse in a chain – cost £1m daily in wasted surveys, fees and time. But while there is agreement that change is needed, this attempt to remedy the situation has sparked industry opposition.

Initially, the central plank of a HIP was the home condition report (HCR), a mandatory assessment of the property, by a new breed of inspector, that was to act as a survey of the property. This was scrapped last year in an embarrassing U-turn, amid mounting complaints that buyers would not trust it, the shortage of home inspectors would cause delays, and mortgage lenders would still demand an independent report.

Dropping the HCR did not, however, dampen industry anger; if anything, the decision to carry on with the rest inflamed it. “We never believed HIPs would improve the selling process, but without the HCR, they become meaningless,” says Peter Bolton King, chief executive of the National Association of Estate Agents. “It is the document potential purchasers would have understood and that would have been of real use to them.”

Now the government seems to have made the importance of getting our homes more energy-efficient the reason for the packs’ introduction. Earlier this month, the housing minister, Yvette Cooper, said: “EPCs are the single most important element. Indeed, they are the only new compulsory element. Otherwise, HIPs simply collect together the legal information and searches that are already provided and paid for in the home-buying and selling process.” All this is going to cost homeowners. During trials involving the use of free packs, sellers and buyers have largely praised them as a good way to speed up the house-buying process – but said they would not be so enthusiastic if they had to pay for them.

From June 1, sellers will. The EPC will cost about £100; what the overall pack will cost is debatable. The government claims that they will cost on average £300-£400, but there are warnings from within the industry that the real figure could be more than £1,000. HIP London, a provider of the packs in the capital, says the official figure skirts around charges for searches and, in particular, the extra costs leaseholders will face.

Hamptons, the estate agency, has already said it will offer free packs in an attempt to attract potential sellers, but Paul Marsh, deputy vice-president of the Law Society, warns that consumers should read the fine print on such offers. “I am concerned about this, as sellers could unknowingly sign up to a sole-agency agreement,” he says. “There is a danger in an estate agent controlling a HIP. The right person is the solicitor, who can take it to any number of different agents.”

Few disagree with the concept of EPCs, which will help householders work out how to reduce their energy bills and carbon emissions. Fridges and other kitchen appliances already feature energy ratings, and manufacturers and consumers have taken them to heart. But refrigeration and cooking account for less than 10% of the energy used in a typical house; heating and hot water, more than three quarters of the total.

So introducing ratings for houses, the biggest purchase most people ever make, does seem logical.

A YouGov poll suggests that more than 70% of people want to know about the energy efficiency of the homes they are buying, and believe it is a good idea to rate them; the Energy Savings Trust estimates householders could save up to £300 a year if they did what an EPC recommended. Cooper has said that if only one in five owners made even the basic changes suggested, the resulting cut in carbon emissions would be the same as taking 100,000 cars off the road.

Such statistics are difficult to argue with. Still, even though the harshest critics don’t believe that at this late stage, HIPs will be scrapped, the new issue is whether or not they are the best vehicle for promoting energy-efficiency.

Even other arms of government are dubious. The Better Regulation Commission (BRC) wants the energy ratings delayed, saying that the requirement for a new one each time a home is put on sale goes well beyond what a forthcoming EU directive requires. “In our review of the regulatory aspects of the Stern report, we explicitly cautioned against ill-considered regulatory responses to the climate-change challenge, and using these as a justification for measures that have other moti-vations,” says the BRC’s chairman, Rick Haythornwaite. “We would like to see evidence that all options to minimise costs have been considered.”

The Royal Institution of Chartered Surveyors (RICS) says that efforts to speed up property transactions and make householders become more energy-efficient don’t go far enough, and that blurring the line between the two is simply confusing.

“We have no issue with EPCs, but they should be carried out when the surveyor is visiting the property for the mortgage valuation or survey, rather than having to organise a special trip, which is not energy-efficient,” says Jeremy Leaf, of the RICS. “EPCs and HIPs are good in principle, but don’t need to be rushed. That will only increase the risk of compromising activity in the property market and of making things even harder and more expensive for first-time buyers.”

Owners will now be allowed to put their properties up for sale while they finalise the pack, but a home’s energy rating must be attached before details can be placed in an estate agent’s window – or anywhere else.

Agents opposed to home packs expect uncommitted vendors to baulk at the cost and decide not to sell; they warn that in a market with a chronic lack of homes for sale, more teething problems could spell disaster.

“I don’t care what the Association of Home Information Pack Providers says, and I care even less what Yvette Cooper says. They do not realise how unprepared the industry and public are,” says Nick Salmon, commercial director of Harrison Murray estate agency and founder of Splinta, an antiHIP group.

Rob Ellice, managing director of Clarke Hillyer, an east London agency, is more circumspect: “With the interest-rate rise and the new legislation, it will hold back people putting their house on the market. People will either put them on in May or hold off indefinitely, which will mean an uneven spread over the year.”

Margaret Grafham, a partner at the Hereford-based surveying practice SSH, was one of the first people to be accredited by RICS as a home inspector, a new profession that was stopped in its tracks by the government U-turn on the home condition report. Unsurprisingly, she likes both HIPs and the energy ratings they will contain. “The ratings will have some influence on the market, and I think people will begin to ask why houses that were put up for sale before June 1 do not have EPCs.”

Will buyers really take a home’s energy-efficiency rating into account? Will they make a decision based on how energy-efficient a home is? Not in the medium term, says the National Association of Estate Agents. “They might get used to comparing similar houses, but that will depend on market conditions,” says Bolton King. “There is still the question of whether it will attract a higher price or just make it more saleable.”

The rating may become a consideration, he says, if similar properties are being viewed. In a row of Victorian houses or city-centre flats, buyers will gravitate to the home with a better EPC rating if little else differentiates them.

In the longer term, the ratings might begin to affect the wider housing market if, for example, “green” mortgages become widely available or there is a sliding scale of council tax for greener properties, something that has been hinted at by Gordon Brown.

In the run-up to June 1, the government is talking to mortgage lenders about the idea of lower-rate mortgages for ecofriendly properties and promising “average homebuyers” of lower-rated homes grants of up to £300 to improve their properties. B&Q is offering discounts on insulation and British Gas is touting free energy audits. Meanwhile, energy costs overall are only going to go in one direction: up. So energy certificates are undoubtedly here to stay.

The city-centre flat

Type of house: A two-bedroom flat, built in 1993

Location: the Jewellery Quarter, Birmingham

Current energy-efficiency rating: 80% (C)

Potential energy-efficiency rating: 82% (B)

Current bills:£198 per year

Potential savings:£13 per year

Main failings:Manually controlled heating

Proposed improvements typically costing less than £500: None

Proposed improvements typically costing more than £500: Install automatically controlled, fan-assisted storage heaters, at a cost of about £1,000 for a property of this size (saving £13 per year)

Survey carried out by: Stephen Callaghan of Energy-assessors.com

Homeowner:Chris Shears, 25, a project administrator. He bought the flat nine months ago through a shared-ownership scheme and already has energy-efficient light bulbs throughout

He says:“I was disappointed to just miss the B grade. It seems there is little I can do to improve the rating, although the suggested improvement was helpful

“I would consider installing new storage heaters if I was going to sell, as they are not hugely expensive. But I think that bringing up the energy efficiency by a grade would have an effect on a buyer of a flat like this.”

The Georgian farmhouse

Type of house: Five-bedroom farmhouse, built in about 1800, with Victorian additions

Location: Ratlinghope, near Shrewsbury, in Shropshire

Current energy-efficiency rating: 30% (F)

Potential energy-efficiency rating: 48% (E)

Current bills: £1,789 per year

Potential savings: £550 per year

Main failings: Solid stone walls are not good insulators; the main floor is built directly on the earth, leaking heat; only 20% of the windows are double glazed; there is only one energy-efficient light bulb

Proposed improvements typically costing less than £500: Add 2in of insulation to the stone walls, at a cost of about £40 per square metre (saving £478 per year); top up loft insulation to 250mm, which will cost about £240 (saving £58 per year); install low-energy lighting (saving £15 per year)

Proposed improvements typically costing more than £500:Change all windows to double glazing, costing from about £350 per window (saving £39 per year); install photovoltaic cells – a typical domestic system costs between £10,000 and £18,000 to install (saving £68 per year)

Survey carried out by: SSH Chartered Surveyors, Hereford

Homeowners: Andrew Sayer, 50, the managing director of a Birmingham-based firm providing services to local authorities, and his wife, Jane, 48, a part-time administrator. They are adding Thinsulate – a plasterboard backed with reflective material – to their walls to reduce their bills

He says: “Old houses are going to struggle to achieve high scores. But I didn’t think it would be quite as bad as that in terms of energy-efficiency. I was disappointed that our boiler, which is just six months old, received only a medium rating.

“It would be good to feel that if we do all these improvements, we could get a much higher rating, but we can’t get away from the fact that the house is not very energy-efficient.

“When you buy a house these days, you have to stick your finger in the air and guess what it will cost to run, as energy has become so horribly expensive. I suppose in a few years’ time, it will have become standard. However, I think the energy-efficiency rating is more relevant if you are looking at lots of similar properties, say a dozen terraced houses, rather than a one-off 200-year-old farmhouse.”

The London terrace

Type of house: A four-bedroom terraced house, built in 1912

Location: Wandsworth, south London

Current energy-efficiency rating: 42% (E)

Potential energy-efficiency rating: 56% (D)

Current bills: £952 per year

Potential savings:£247 per year

Main failings: Solid brick walls without insulation; suspended timber floor; no low-energy lighting; no individually controllable radiators; only 55% double glazing; noncondensing gas boiler

Proposed improvements typically costing less than £500: Add 2in of insulation to solid walls, at a cost of about £40 per square metre (saving £170 per year); top up loft insulation by 250mm – the typical cost is £240 (saving £30 per year); add insulation to hot-water tank and pipework – costing about £300 (saving £19 per year)

Proposed improvements typically costing more than £500: Install thermostatic radiator valves, which cost £250-£300 per radiator (saving £39 per year).

Further improvements could be made by installing solar water heating – a domestic system will cost £3,000-£4,500 to install (saving £17 per year) Survey carried out by:Sava inspector Ian Barton Homeowners:Cathy Robinson, 47, and her husband, Joseph, 53, both journalists. They have four children living at home

She says:“I didn’t think we would get a good rating, as it is a draughty property. We will now look at insulation and thermostatic controls for the radiators, get some quotes on the windows and do something about our boiler.”

Dear Sir, I believe that you have chosen some crazy alterations to the older properties that you have surveyed. How can you add insulation to existing solid walls without changing the appearance and character of the property? Why suggest PV and not consider solar water heating, which is probabley, much more user friendly? Surely thermostatic radiator valves do not cost anything like the Â£250 to Â£300 each that you suggest? Why insulate the party walls? Insulate the external walls perhaps, if it can be achieved without too much effort. Change the boiler, but what is the point of the vendor installing energy efficient light bulbs when they can presumably take them with them when they leave, as they are not fixtures, or has the law also changed in that respect?

R J Siddall, Pontypridd, Wales

I understand PV cells last about ten years and their carbon footprint when produced is greater than can be recouped in the cells useful lifetime, you then have to dispose of the old cells, if the electricity is stored in lead acid batteries these also have a limited life.

Low energy light bulbs are cost effective maybe, they only last longer if left on continuously, if switched on and off regularly their life is drastically shortened and they take time to warm up to full brightness.

Rob, nottingham, nottinghamshire

How can thermostatic radiator valves be £250 - £300 per radiator when they only cost about £10 each? Also, solar water heating would surely save more than £17 a year. Where do these figures come from?!!

Philippa Cane, Guildford, Surrey

From what I can see most energy saving work recommended by EPC's and Eco web sites seem to completely miss the cost to recoup your investment little own start to save money by reducing energy usage, I have read somewhere that even the cheapest solutions seem to have payback period of about 20 years and this seems to fit with the costing Anthony provided. PV systems even at £10k saving £68 would take 147 years to pay for themselves, not much of an insentive is it? The loft insulation example above would take just over 4 years to pay for itself so even this is something that needs to be considered by anyone planning on doing it. The only sensible solution that I have seen to date are energy saving light bulbs, replace your normal ones as they blow with energy saving ones and you seem to make a saving on your investment within your lifetime! Most of these measure only seem cost effective on new builds.

Kevin Alexander, London,

Is it possible to get a second opinion or appeal if your property is rated low?

I would guess that as the energy assessment process is so mickey mouse and the level of training so poor (it doesnt seem to take much prior experience to be able to do the course) that banging your head against the wall would be a better option.

MGB, Carmarthen, Wales

I believe the point of these reports is not to 'force' you to change things but provide a solution to save energy. If it is cost effective - then do it. If not then don't.

A lot of houses in the UK are not very eco friendly, if we can do our bit to help the planet, we should. I disagree with people using examples like spending 10K to 18K to save 68 pounds is madness as they are an indication of what you can do, not what you have to do!>

Ben, Manchester,

Indeed it is. No mention or consideration of the severe disruption adding inner lining...moving and adjusting skirtings, to say nothing of the impact of lining the window ingoes and the effect on the frame details.
Ulimately, if you can get round all that for £40/ m2 (does that figure allow for the crafstmanship required?) you will end up with cold bridging where internal masonry walls meet externals...all complete tosh

Caliwag, York

JIm Comrie, york, north yorkshire

are they serious? install photovoltaic systems at £10K to £18K to save £68 per year? interior line walls at £40 per square metre; my house would cost £9,000 to save perhaps £500 per year? This is madness.

Anthony , sheffield, uk

As an estate agent of many years who has now trained as a home inspector, I am pleased to see that the homeowners involved in these test cases have taken on board the recommendations.

I can speak from both sides of the fence in the debate about HIPs, and find it interesting that each 'professional' organization against HIPs has something to lose... RICS may lose their stranglehold on the homebuyers surveys, The NAEAs estate agents might lose their control of the instruction process, even the law society is chipping in to protect their members conveyancing work by recommending people to solicitors rather than pack providers.

HIPs are only the first part of a process that will speed up the house buying experience, but an essential part. Without them e-conveyancing, home condition reports and mortgage company AVMs (automated valuation modules) will have nothing to 'bolt on' to.

The public need to be told the benefits and long term plans, not just the scare stories.

Tony Claydon, Peterborough, Cambridgeshire

This really is barmy.

Who in their right minds would install solar water heating costing at least £3000 to save only £17 pa?

Presumably the £17 saving is on the heating costs to the house.

How much pollution is cause by making and fitting the solar panels in the first place?

Every new law brought in by this government seems half-baked and badly thought out.

Bill, Colchester, England

Buying a home is obviously infinitely more complex than buying a fridge. In other words, there are so many major factors to take into account - location, condition, architectural atyle, availability, price - that the property's energy rating will be somewhere near the bottom of the list for most buyers. Properties with poor ratings can in any case be upgraded at a later date.

The worry is, Energy Performance Certificates will simple encourage owners of older 'period' properties to rip out perfectly good timber windows and stick in UPVC double galzing - which has a typical energy payback period of up to 100 years.

Note also that most Energy Assessors will not be qualified chartered surveyors - and may have been selling ice cream (or double glazing) until now. The jury is still out on their competency levels, although the EPC reports themselves are computer generated.

Ian Rock MRICS, Oxford, Oxon