The property industry can’t afford not to adapt to climate change

Extinction Rebellion in London. Image: Getty.

From the school strikes for climate, to Extinction Rebellion protests and calls for a Green New Deal, citizens around the world are putting pressure on their governments to prevent global warming more than 2°C above pre-industrial levels.

In the UK, these efforts have met with some success – the government has declared a “climate emergency” and promised to reduce greenhouse gas emissions to net zero by 2050. Even so, scepticism persists in some quarters: former chancellor of the exchequer, Philip Hammond, has argued that the UK government’s goal may be unaffordable, based on estimates that the transition to a zero-carbon economy could cost up to £1trn.

Of course, there is likely to be significant public money spent on renewable energy transition and carbon offsetting. The costs of assets made obsolete by climate change policy – such as unexploited fossil fuel reserves – is also potentially huge.

But the problem with perspectives like Hammond’s is that they don’t balance the cost of acting now against the cost of doing nothing. In the UK and around the world, people live and work in buildings that are typically powered, heated and cooled using energy from fossil fuels. If these buildings are not retrofitted with energy efficiency measures, there is a real risk they will be rendered obsolete by policies aimed at reducing greenhouse emissions.

A valuable asset

Research at Northumbria University has examined this situation in relation to international real estate. The global value of real estate is estimated at $217trn – that’s roughly 2.7 times the GDP of the entire world. Of this, $162trn worth is residential, $29trn worth is commercial and $26ttrn worth is agricultural land.

A conservative estimate is that global real estate consumes 40 per cent of global energy annually and accounts for more than 20 per cent of international carbon emissions. So it’s hardly surprising that international agencies have identified real estate and the built environment as key contributors toward global warming and a major target of international efforts to reduce greenhouse gas emissions.

One of the most comprehensive approaches to reducing building energy use can be seen in the European Union (EU). A 2010 directive on energy performance made it mandatory for all European properties to hold an energy performance certificate and monitor energy use from heating and air conditioning. The government of England and Wales has used these energy performance certificates to enforce minimum standards of energy efficiency for privately rented family homes and commercial properties.

Since April 2018, any commercial property with an energy performance rating below E (that is, those properties with F and G ratings) has been deemed illegal to let (although there are some exemptions related to maximum cost of improvements). By 2020, the plan is for these same rules to apply to residential property – which includes shared homes, nursing and care homes and blocks of flats.


A less daunting prospect

In England and Wales, it is estimated that 10 per cent of residential property stock (worth £570bn) and 18 per cent of commercial stock (worth £157bn) does not meet these minimum standards. If these properties are not retrofitted to become more energy efficient, they will become obsolete and lose value, since the owners will no longer be allowed to let them.

Put this way, the cost of achieving an energy transition is less daunting, because the cost of not acting is equally (if not more) expensive. It’s even reasonable to expect benefits to the economy from the growing building retrofit industry.

If all international governments adopted similar minimum energy efficiency standards as the UK – and assuming the same proportions of property stock are potentially obsolete – the risk value for residential real estate property assets can be estimated at $16trn and $5trn for global commercial assets (based on their global vale, mentioned earlier).

A timely riposte

The potential cost of not acting in the real estate sector should provide a catalyst for the transition to more energy efficient buildings. It should also provide a riposte to those who worry about the cost of transitioning to net zero emissions. Indeed, there’s a clear need for investors and property owners to move beyond green-washing and reduce the carbon emissions of real estate before costly regulation and enforcement sets in.

Ignoring climate change exposes real estate assets to the risk of permanent disruption – especially now that the potential impacts of global warming are being widely acknowledged. Clean technology is becoming more affordable and consumers are adopting principles of environmental sustainability. Indeed, it’s already becoming more common for investment managers and financiers to demand that companies disclose business model exposure to climate change, while investors are starting to take advantage of exposed assets.

It makes sense for property owners to plan for the introduction of powerful new climate-related policies in the coming years. Adapting existing buildings and constructing new developments that are not reliant on fossil fuels – though perhaps costlier in the short term – can create a more resilient, and therefore valuable, asset in the longer term.

Kevin Muldoon-Smith, Lecturer in Real Estate Economics and Property Development, Northumbria University, Newcastle and Paul Michael Greenhalgh, Professor of Real Estate and Regeneration, Northumbria University, Newcastle.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 
 
 
 

Older people need better homes – but then, so does everybody else

Colne, Lancashire. Image: Getty.

Towards the end of last year, I started as an associate director at the Centre for Ageing Better, working particularly on our goal around safe and accessible homes. Before I arrived, Ageing Better had established some ambitious goals for this work: by 2030, we want the number of homes classed as decent to increase by a million, and by the same date to ensure that at least half of all new homes are built to be fully accessible.

We’ve all heard the statistics about the huge growth in the number of households headed by someone over 65, and the exponential growth in the number of households of people over 85. Frustratingly, this is often presented as a problem to be solved rather than a major success story of post war social and health policy. Older people, like everyone else, have ambitions for the future, opportunities to make a full contribution to their communities and to continue to work in fulfilling jobs.

It is also essential that older people, again like everyone else, should live in decent and accessible homes. In the last 50 years we have made real progress in improving the quality of our homes, but we still have a lot to do. Our new research shows that over 4 million homes across England fail to meet the government’s basic standards of decency. And a higher proportion of older people live in these homes than the population more generally, with over a million people over the age of 55 living in conditions that pose a risk to their health or safety.

It shouldn’t be too difficult to ensure all our homes meet a decent standard. A small number of homes require major and expensive remedial work, but the overwhelming majority need less than £3,000 to hit the mark. We know how to do it. We now need the political will to make it a priority. Apart from the benefits to the people living in the homes, investment of this kind is great for the economy, especially when so many of our skilled tradespeople are older. Imagine if they were part of training young people to learn these skills.


At a recent staff away day, we explored where we would ideally want to live in our later lives. This was not a stretch for me, although for some of our younger colleagues it is a long way into the future.

The point at which the conversation really took off for me was when we moved away from government definitions of decency and accessibility and began to explore the principles of what great homes for older people would be like. We agreed they needed light and space (by which we meant real space – our national obsession with number of bedrooms as opposed to space has led to us building the smallest new homes in Europe).

We agreed, too, that they needed to be as flexible as possible so that the space could be used differently as our needs change. We thought access to safe outdoor space was essential and that the homes should be digitally connected and in places that maximise the potential for social connection.

Of course, it took us just a few seconds to realise that this is true for virtually everyone. As a nation we have been dismal at moving away from three-bed boxes to thinking differently about what our homes should look like. In a world of technology and factory building, and as we build the new generation of homes we desperately need, we have a real chance to be bold.

Great, flexible homes with light and space, in the places where people want to live. Surely it’s not too much to ask?

David Orr is associate director – homes at the Centre for Ageing Better.