EPCs – a long road ahead

I’m currently moving house. It’s stressful, but the process offers a real highlight for the policy geek in me, as I’ve commissioned an EPC in order to sell my current home and can pore over them for homes I’m considering moving to. Having lobbied for them as a tool with the potential to influence people’s purchasing decisions in the shorter-term, and the potential to be transformed into a regulatory instrument that drives the retrofitting of draughty, inefficient houses in the longer-term, I was keen to see what the consumer experience of them was like.

It didn’t start out well.

At the selling end, the first significant mention of them was by one estate agent who said “you have to get this thing called an EPC. They’re a total waste of time and money.” None of the other estate agents I met were quite so vehement, but they just mentioned EPCs in passing as a legal requirement. And when I was looking at homes as a buyer there was only resounding silence. EPCs were never mentioned.

Sending the right message
So the messengers in the process aren’t exactly selling EPCs and their potential benefits. As a result, house buyers don’t look to them as a useful source of information that can tell them how much their home is going to cost to run and what they can do to reduce those costs. No one is going to make a decision between two houses based on energy costs – but they could and should be a negotiating tactic. My new home has an ancient boiler and doesn’t have enough loft insulation – ideally I could have knocked some money off the sale price to recognise that.

Because that doesn’t happen, people selling their homes have no incentive to improve the energy performance of their home in order to impress buyers (in the same way that we painted over our questionable orange ‘statement wall’). And when you’re a proud new home owner, you have no incentives and no strong messages that suggest it would be worth investing in the energy efficiency improvements mentioned in the EPC for your new home.

How accurate are EPCs?
Messages aside – what about the accuracy and usefulness of EPCs for those of us who indulge in actually reading them? Again, not great. The man who did the EPC for my current home was an unlikely environmentalist but he felt strongly that people didn’t realise how useful they were and that the whole system was poorly run. He said that most people don’t have any interest in their EPC, so the awareness raising potential of his visits to peoples’ homes is missed.

And it was clear that the measurement system is less than ideal. Based on when my house was built the assessor made various assumptions about the levels of insulation I’d have. I know them to be incorrect but the system couldn’t account for that. As a result the EPC doesn’t suggest getting cavity wall insulation, as it assumes it’s there, and we probably got a better ‘score’ than we should have done. My colleague provides an even worse example. She lives in a Victorian flat with windows that are single glazed and clearly do not fit, yet her property scored a B rating. A mere 1 per cent of homes in the UK score ratings of A and B combined, and I’m sorry to say that my colleague’s is very unlikely to be one of them. She’s convinced that the energy assessor just made it up, which unfortunately tallies with the stories from my assessor about unscrupulous companies doing EPCs over the phone and relying on the answers from homeowners.

Policy design – will the Green Deal help?
So EPCs roll on as something with massive potential that it going totally unrealised. Getting the messaging right would help enormously – as it will make a huge difference hear messages from estate agents and, gradually, from potential buyers, that EPCs are worth engaging with. Going further still, they could become a harder measure. With enough lead in time and warning, it could become impossible to sell a home unless the suggested improvements on an EPC have been done, or it could be required that they must be done by the new owner within two years of purchase. That’s unlikely, I admit. So let’s hope that the Green Deal focuses more attention on EPCs, directing consumer attention to them and prompting take up of the Green Deal in response to suggestions that home buyers and sellers receive on their EPC.

As we look at how to make the Green Deal work, my experience with EPCs is a timely reminder that getting a policy mechanism in place is the first step, not the last. Policy success lies in how people interact with them and, in the case of EPCs, it has not been great. They have not driven anywhere near the level of energy efficiency retrofit that they have the potential to. We cannot afford this outcome with the Green Deal as well. Good policy design is essential but, in the end, it needs to be something that people think will work for them, amidst all the competing priorities in their life, and which they decide to pursue.

8 comments

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  • Nye Bevan famously said that to get the NHS passed doctors he had to “stuff their mouths with gold”. Can the same approach work with estate agents? Should they get some commission from the insulation services sold as a condition of the mortgage? It is not unreasonable for those providing the bulk of the money to have some conditions attached, and energy efficiency is a reasonable condition to make a loan prudent.

  • James Drinkwater

    The enforcement regime behind EPCs is poorly structured, and results in EPCs not being produced / awareness being low. Currently, there is little point paying to have a thorough audit done by a good EPC provider, as if a buyer / tenant is looking at 20 properties and only 1 of them has an EPC, the value of the EPC as a tool of comparison is zero. Too many EHS laws are drafted such as to be unenforceable, but the redrafting of offences to bring in other actors along the supply chain (as in REACH chemicals legislation) can have a hugely beneficial effect.

    Higher financial penalties (current limit is £5k) would be very likely to result in higher take up, but would also result in socially undesirable effects. At any rate, homeowners can hardly be expected to have heard of something most commercial real estate lawyers are bearly familiar with. However, adding an offence of advertising a property (on paper or online) without displaying an EPC as part of that advertisement would mean that estate agents would have to ensure that property owners obtain / supply an EPC upfront. It would also be far easier for Trading Standards to track and enforce the regime. The duty to obtain / supply the EPC as part of the letting or sale would remain with the owner, so the new offence would simply ensure that EPCs are pushed for at the earliest juncture in the transaction. At present, buyers have no real incentive to push for these.

    This would encourage agents to engage with EPCs, and you would hope might even lead to their realising that a thorough EPC resulting in a high score is a pricing / selling tool.

  • This is going to be a long reply – sorry! only read on if you want to learn a bit more about how EPCs actually work.

    “.. I know them to be incorrect but the system couldn’t account for that”

    Kaye comments that the assessor made assumptions about the levels of insulation in her house based on when it was built, and although she knew them to be incorrect, the system couldn’t account for that. Does this really indicate that the system is less than ideal, or could it be that no-one in the process has time to explain it? I think it might be the latter, especially as I know that so many clients pay a significant fee to an estate agent or national provider, who pockets most of it and passes on as little as £25 to the assessor who visits the home and provides the EPC. With such little financial reward, the assessor can’t afford to spend time with the client, and worse, some assessors will take the view that the fee doesn’t justify even taking the time to do an accurate assessment.
    When the client wants to know more about the assessment (sadly, this usually only happens when they disagree with me over some part of my survey) I will happily explain the “rules” that responsible DEAs follow. These include not recording an energy saving feature unless I have seen evidence that it is there. This is reasonable, if you think about it – how would you like it if the MOT tester could amend his report on the car you are thinking of buying, based only on a claim the owner made about it?
    For Cavity wall insulation, one important rule is that the assessor only records it as present where the insulation has been retrofitted – that is, added to the wall after the home was built, usually by injecting through holes in the external wall leaf. Recording a wall as filled cavity when the insulation was part of the original build would give an incorrect result, as the insulation would be counted twice –once for the original insulation, and again for retrofill insulation that hadn’t actual been done.
    I recently did an EPC for a seller who had good reason to believe her home’s walls had been retrofilled with Cavity Wall Insulation, because she had enquired about getting it done and had been told the house already had it. Unfortunately there was no visible evidence in the walls, and no CWI guarantee certificate, but I looked for and eventually found the tell-tale boroscope hole, which supported her claim that a CWI surveyor had checked the walls. I persevered, and finally I found and photographed the one faintly visible borehole that proved that CWI had been injected into the walls, and was able to record the walls as insulated cavity.
    This is a slightly different situation from the one described by Faye, where the EPC didn’t recommend cavity wall insulation. There are many possible reasons for this: obviously it wouldn’t be suggested for walls with no cavity, nor for cavity walls that have been retrofilled (like the walls in the home I was surveying). Cavity walls in homes built after partial fill became common in about 1983 will also not get this recommendation. Where a wall cavity was partially filled when it was built, it isn’t usually possible to add more cavity fill, so recommending it for walls with partial fill was ruled out to prevent the possible problems that could result from inappropriate filling of such cavities. Retrofilling these modern cavity walls, even where not partially filled on construction, doesn’t improve the heat retention as much as filling a completely uninsulated cavity, so there is less to save. It’s arguable that topping up the loft insulation is a better recommendation to make for a home of this age.
    Faye says that she knows the assumptions to be incorrect for her home, but I believe it’s reasonable that the assessor isn’t allowed to include something that the occupier “knows”, unless it can be proved. The system assumes that the insulation in the walls (and floors and roofs, too) is to the standard required by the Building Regulations at the time the home was built. This is correct, providing that housebuilders comply with Building Regulations, and don’t insulate to lower – or higher – standards than were required at the time. We know that sometimes lower standards slip through, but insulation levels are assumed because it’s not practical for an assessor to assess insulation levels where they cannot be seen. If Faye’s home really did have insulation levels less than the assumed amount, her house may well have received a better ‘score’ than it should have done – but is there a better approach?
    Finally, what can be done about those “unscrupulous companies doing EPCs over the phone”? Well, all EPCs are produced by accredited assessors, and the best defence is to report any suspicions to the assessor’s accreditation scheme. If those assessors who cheat in this way, or who don’t spend long enough in the home to do an accurate survey, or whose work is deficient in any other way, go unchallenged and therefore aren’t deregistered, how are those of us who do a good job going to get any work?

  • Thanks for your comments on my post. I was suprised to read this article today – claiming that the market is being flooded with green homes and noting, rather optimistically I feel, that EPCs make “the benefits of having an eco-friendly home much more transparent and easier to quantify.” True in theory, but as you all note, not really true in practice. http://www.businessgreen.com/bg/news/2070592/green-homes-flood-property-market-estate-agents

    As David notes in his comment, I think that stuffing the mouths of estate agents with gold would indeed be the way for them to sing the praises of EPCs. But they seem to be pretty stuffed with gold anyway, so there would have to be a real push to get them on board, and it’s not clear where that cash would come from. And as James notes, the enforcement and regulations about when EPCs have to be displayed are sorely lacking. I think the only hope for realising their potential lies in tying them into more and more pieces of legislation until they gain traction, recognition and engagement in a marketplace which clearly views them with indifference at best or disdain at worst.

    • I agree that they should be embedded in more legislation, in order to raise their profile. I also think that the client is the key to this: as I said previously, the best defence against poor quality EPCs is to report any suspicions to the assessor’s accreditation scheme. If assessors who don’t do the job right go unchallenged, and therefore aren’t deregistered, how are those of us who do a good job going to get any work?

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  • As an EPC assessor and a chartered surveyor I feel we are trying to close the gate after the horse has bolted. The biggest difficulty, in my opinion, is that EPC’s already have a bad name as far as the public are concerned and it will be very difficult to change this opinion. When they were introduced no-one knew what they were and the public saw them as a stealth tax. They were brought in with very little warning and they were not explained to the public. That was left to the EPC assessors themselves. So it’s not hard to see why they got the bad press.

    The second issue I see is with the many poor assessors out there providing EPC’s. It used to be the case that you had to be a chartered surveyor to carry out SAP reports (the predecessor to EPC’s). However, I suspect, the government did see these as a form of “cash cow” albeit it one that did have sound environmental benefits. I suspect they pushed EPC’s in quickly knowing they would generate massive revenue via the lodgement fees and VAT payments made by the assessors and so didn’t take the time to think the whole process through.

    By pushing it in quickly they had to open the EPC market to anyone who was prepared to spend a few thousand pounds on 4 or 5 days training as the chartered surveyors out there (who took 6 years to qualify) and have a sound knowledge of construction etc. couldn’t cope with the volume of properties that had to be assessed (every property on the market in the UK at that time). So of course you will end up with some assessors who don’t really know what they are doing (don’t get me wrong there are many assessors out there who are not RICS members who do a great job). I’m just trying to follow a point to completion. So all of a sudden, after the initial glut of properties had been assessed and the number of EPC required dropped back to normal there were too many assessors!

    Next step is for the assessors to start cutting their fees to try and get work and the cycle continued until we got to where we are at present. Assessors’ who are worth using aren’t prepared to do them for the pittance they get, so you are left with the unscrupulous ones who will cut corners to get through twice as many in one day to try and get a normal income.

    Well that’s what I think and it is why I and many assessors I know have stopped providing EPC assessments.

    The public should remember an EPC is only a guide. They make suggestions and give estimated running costs but no one should take these figures as exact. If assessors’ were to carry out accurate assessments on each house it would take several days and cost hundreds of pounds to prepare one report and even at that point the next occupiers might leave the windows of the house open or leave the heating on for a few hours longer and that would change the results again.

    In conclusion, I feel the idea behind EPC’s is good, yes they are flawed but it’s impossible to design a generic system that has to suit every property in the UK that isn’t flawed. I feel the biggest issue is that public opinion has decided they are worthless and that is going to be a very difficult tide to turn.

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