1. Executive summary

Over the past year Consumer Scotland has engaged with the Scottish Government as it prepared proposals to introduce a Heat in Buildings Bill which, if passed by the Scottish Parliament, would prohibit the use of fossil fuel heating as the primary heating system in all buildings by 1 January 2046 and serve as an enabler for subordinate regulations designed to improve the energy efficiency of Scotland’s buildings.

Consumer Scotland’s draft work programme 2024-2025 contains three strategic challenges which inform all of its work. These challenges include affordability, climate change mitigation and adaptation, and consumers in vulnerable circumstances; all of which are key features of the Heat in Buildings Bill consultation.

Climate change mitigation and adaptation has been a key feature across Consumer Scotland’s work since its inception. We have carried out research to understand how consumers engage with the transition to Net Zero. We have also launched research looking to understand consumers’ motivations and experiences of installing low carbon technologies, including solar PV and heat pumps. Consumer Scotland has also produced a range of submissions and briefings to help inform and support government officials. This has helped to inform government work on decarbonisation, and to support consumers to transition safely and at the pace and scale required to meet Scotland’s statutory greenhouse gas emissions reduction targets.[1]

Consumer Scotland does not underestimate the challenge of decarbonising Scotland’s buildings, nor the significant ask being made of consumers to help to meet the science-based target to reduce the emission of designated  greenhouse gasses in Scotland to net zero by the end of 2045.[2] However, we also recognise the opportunity to raise the energy efficiency of buildings in Scotland. This will help facilitate the achievement of Scotland’s emissions reduction targets, lead to substantial health benefits, and lower energy consumption and potentially bills, all to the benefit of current and future consumers.

Consumer Scotland therefore welcomes the consultation on a New Net Zero Standard for Social Housing, which aims to reduce greenhouse gas emissions in line with science-led targets, while at the same time improving energy and rent affordability for tenants living in social housing.

Consumers Scotland further welcomes the principles set out in section 2 of the consultation document, which provide a robust framework for delivery, and which are consistent with the consumer principles which guide our approach; access, choice, safety, information, fairness, representation, sustainability and redress. In responding to this consultation Consumer Scotland consulted a range of stakeholders to seek their views and discuss the content of the proposals to consider the impact on social housing providers and their tenants, in line with these principles.

However, on the basis of the material provided in the consultation we highlight three issues in relation to the delivery of these aims in practice.

Firstly, we would encourage the Scottish Government to carry out analysis and modelling on the impact that the new social housing net zero standard will have on both social housing providers and tenants before proposals are finalised, in order to avoid any unintended detriment.

Secondly, while the consultation gives estimates for the total – and significant - costs of achieving delivery of the standard, available evidence and feedback from stakeholders suggests these costs are underestimates, for a combination of reasons. As above, greater clarity on the impacts of investment costs on tenants is needed, again to avoid unintended detriment.

Finally, greater clarity on the probable impacts on tenants’ energy bills is needed. As recognised in the Ministerial Forward to the consultation, the current high relative cost of electricity compared to fossil fuels means that a move to clean heating for tenants currently using mains gas risks worsening already high levels of fuel poverty. Until this issue is addressed, it will, unfortunately, be very challenging to find a pathway to deliver the consultation aims without either:

  • significantly greater public sector investment than is available at present, or
  • significant increases in tenants’ rent which will not be offset by lower energy bills

Our response therefore concentrates on approaches which make financial sense to both housing providers and tenants at present, and which will assist with the low carbon transition in the interim, while market issues are addressed.

Our response also takes account of the relationship between private and public sector housing, as covered in more detail in our response to the Heat in Buildings draft Bill consultation.

2. Introduction

Consumer Scotland is the statutory body for consumers in Scotland. Established by the Consumer Scotland Act 2020,[3] our Purpose is to improve outcomes for current and future consumers. We are independent of the Scottish Government and accountable to the Scottish Parliament. Our core funding is provided by the Scottish Government, but we also receive funding for research and advocacy activity in the electricity, gas, post, and water sectors via industry levies which are derived from consumers’ bills.

Our responsibilities relate to consumer advocacy. In our 2023-2027 Strategic Plan,[4] we have identified three cross-cutting consumer challenges, which guide our work during this period. They are:

  • Affordability
  • Climate change mitigation and adaption
  • Consumers in vulnerable circumstances

Consumer Scotland welcomes the opportunity to contribute to this consultation. We are pleased to provide one part of the necessary input on the interests and protections on behalf of consumers.

We recognise the significant contribution that heat in buildings makes to Scotland’s greenhouse gas emissions, and the importance of improved energy efficiency to realising a just transition to Net Zero. We also recognise that a strong programme of improvements to the energy efficiency of social housing in Scotland is positive and necessary component to addressing energy inequalities and improving Scotland’s energy productivity.

To guide our response to this consultation, we have utilised our Consumer Principles. These are based on frameworks that have been developed over time by both UK and international consumer organisations. Reviewing policy against these principles enables the development of more consumer-focused policy and practice, and ultimately the delivery of better consumer outcomes.[5] The Consumer Principles are:

  • Access – can people get the goods or services they need or want?
  • Choice – is there any meaningful choice?
  • Safety – are consumers adequately protected from risks of harm?
  • Information – is it accessible, accurate, and useful?
  • Fairness – are goods and services detrimental or inequitable to individuals or groups of consumers?
  • Representation – do consumers have a meaningful role in shaping how goods and services are designed and provided?
  • Redress – if things go wrong, is there an accessible and simple way to put them right?
  • Sustainability – are consumers enabled to make sustainable choices?

Viewed through these lenses, our initial assessment is that, while the overall aims are clear and positive, the evidence, data, and analysis required to support the specific proposals presented by the Scottish Government in the consultation are not always available. As a result, our response therefore focuses on the principles which underpin the proposals and, where we have sufficient information, on the consumer outcomes we envisage might be realised, based on our understanding of how they are likely to be operationalised.

3. Fabric efficiency rating

In line with the need to achieve both climate change and fuel poverty aims, the consultation proposes to set a fabric efficiency rating for social housing needed to achieve a set standard of energy efficiency.

The level is proposed as a range between 71-120 kWh heat demand per year, excluding hot water, equating to current EPC B-C. Properties which are harder to treat would be required to achieve the lower level of efficiency (i.e. 120 kWh / year).

The consultation questions explore whether this would be an end point (option 1) or an interim position, with all properties required to reach the higher efficiency level by 2040 (option 2).

There are also questions on:

  • how best to measure the energy efficiency performance of a home in practice
  • as in the Heat and Buildings draft bill consultation, whether an alternative approach based on measures (loft and cavity wall insulation, draft proofing, etc.) would be useful
  • how the sector should deal with homes unable to reach the new standards cost effectively

Question 1: To what extent do you support the use of a fabric efficiency rating, based on heat demand but disaggregated from heat source?

Consumer Scotland supports the use of a fabric efficiency rating based on heat demand but disaggregated from heat source; we recognise that this approach is in line with recommendations made by the Committee on Climate Change.

Question 2: Of the options presented for the fabric efficiency rating, which one do you support for the new SHNZS?

In theory, Consumer Scotland, would want to see the highest possible levels of energy efficiency in all homes, were resources unlimited.

In practice, however, we appreciate that there are cases where the additional cost of achieving higher standards would, at present, be disproportionately high for the additional benefits gained. We therefore agree that a range should be adopted as proposed (set out in Option 1 of the consultation document), and that social landlords should be encouraged and supported to further improve standards where appropriate.

Question 4: What are your views, if any, on how performance against the fabric efficiency rating should be measured?

We would support measurement using technical approaches which are consistent in providing the efficiency rating of a dwelling in a way similar to the current EPC rating scale.

While we understand that it will be helpful to tenants to understand heating costs for their individual homes, as discussed, we recognise:

Firstly, as set out in the consultation, this would require considerable additional resource; and

Secondly, that different households can and do have radically different energy consumption patterns, even when living in similar houses.[6] Feedback from social landlords suggests this is also the case for social housing tenants, meaning that data based on previous occupants’ experience would not necessarily be useful.

We appreciate, though, that it is clearly in tenants’ interest to know their possible heating costs in advance of moving in, and that this information is currently provided in EPCs. It would be helpful if the Scottish Government could provide benchmark running costs for different household types depending on fabric rating, heating system and size of dwelling.

Question 5: What are your views, if any, on the proposal for a minimum fabric efficiency standard?

Consumer Scotland welcomes the approach of setting a minimum fabric efficiency standard in principle. However, we are not convinced that the use of a “list of measures” approach as proposed in the consultation would be effective in terms of raising standards, although the reasons for this are different in the social housing sector from those set out in our response to the Heat in Buildings Bill consultation, in respect of private housing and non-domestic properties.

In the social housing sector, the Scottish Housing Quality Standard (SHQS) has been in place for nearly 20 years and, integrated with the Energy Efficiency Standard for Social Housing (EESSH), has been successful in driving improvements across the sector. There is a high level of overlap between the measures listed and those already required by the SHQS.[7]

While the Scottish House Condition Survey[8] suggests that there remain relatively small numbers of social housing properties where these measures remain outstanding, given the history above, it is unlikely that significant further installation of these measures in social housing would be driven by the approach proposed.

Our understanding is that these measures are most likely not to be present either where technical barriers exist due to building construction or weather conditions, or as a result of administrative barriers, such as refusal of measures by sitting tenants or in relation to lack of communal agreement in relation to flats in buildings with multiples tenures (as discussed in the consultation). Further promotion of the measures on the list will not change these circumstances, if this initial picture is accurate.

However, we recognise that our understanding is based on engagement with social landlords rather than a structured survey. Robust data on the possible impact of the proposed approach is essential to inform this discussion, given the importance of managing costs and maximising both carbon and affordability benefits.

Question 6: What, if any, are your views on whether homes should not be re-let if they cannot meet a minimum fabric efficiency standard?

We understand the reasons for considering this issue. While Scottish House Condition Survey data shows clearly that social housing overall is more energy efficient than other tenures, there remain small but significant numbers of less energy efficient homes in the sector. SHCS data also show the clear link between lower energy efficiency standards and fuel poverty.

However, there is a lack of detailed baseline data on the numbers and circumstances of dwellings potentially affected necessary to inform this debate. Discussion with stakeholders suggests that the homes affected are likely be those needing complex and/or more expensive measures, such as non-standard solid wall insulation, and/or flats in which the installation of even lower cost measures is blocked by lack of communal agreement.

Notwithstanding the lack of baseline data, Consumer Scotland suggests that consideration of contextual, interlinked questions will be necessary in order to come to a conclusion about the approach. These questions should include:

  • What might be the future of any homes unable to meet new standards? and
  • What might be the impact on the local affordable housing market if these homes are sold?

It also seems likely that homes disposed of would be bought by either:

  • by owner occupiers who would face similar problems to social landlords in taking action to improve energy efficiency, or who would be subject to a less rigorous standard of fabric efficiency; or
  • by private landlords, in which case the dwellings concerned might re-appear, almost certainly at higher prices but again subject to lower fabric standards, in the private rented sector.

There is a risk that such an approach could therefore result in fewer affordable homes being available, without a reduction in greenhouse gas emissions and with a zero or negative impact on fuel poverty. It also seems likely that some of these homes will be in areas in which local authorities have declared housing emergencies.

In terms of climate change, this could be seen as a form of carbon leakage, where actions taken to reduce emissions from within the boundaries of one part of the housing sector are simply transferred to another part of the same sector, rather than being eliminated.

Although not raised in the consultation, Consumer Scotland would suggest that, if this approach is further developed, consideration should be given to opportunities for consolidation of ownership of blocks of flats. This could involve the re-use of funds raised by sales, and the use of other additional funds, to explore the possibility of purchases of existing properties where such consolidation may provide for both expansion of the numbers of properties available for social rent and installation of energy efficiency measures. We are aware that some RSLs already take this approach[9].

4. Clean heating

Consistent with climate change targets and with the Heat in Buildings draft bill consultation, the proposed Social Housing Net Zero Standard will set a backstop date of 2045 for the replacement of all heating systems which emit greenhouse gases at the point of use.

The consultation sets out two possible options for moving towards that end date, through either setting interim targets for all social housing providers (or for regional groups of providers); or by focusing on the installation of clean heating systems in properties more likely to provide benefit in terms of reducing climate change emissions and providing affordable energy.

The consultation also seeks views on the connection of social housing to heat networks. Importantly, the wording of the consultation is different in this consultation from that used in the Heat in Buildings draft bill consultation. In this case, ‘mandatory’ connections are discussed.

Question 8: To what extent do you support the requirement to install a clean heating system by 2045?

Given climate change targets, we support both the aim behind this requirement, and the requirement itself, as long as it is delivered in ways consistent with the principles set out in section 2 of the consultation document.

Question 9: Of the options presented for the interim targets, which one do you support for the SHNZS?

The Ministerial Forward to the consultation rightly emphasises the current balance of costs between fossil fuel and electricity prices. We agree that this creates a potential tension between the aims of decarbonising heating and providing affordable warmth.

This tension is more acute for properties currently using mains gas. At the current level of the default tariff cap, the price of a unit of electricity is slightly over four times that of the price of a unit of mains gas,[10]. This can make it challenging for heat pumps to deliver heat at comparable or lower costs for tenants. The Energy Saving Trust quotes[11] efficiency rates of 300% for heat pumps based on consumer experience, although industry figures for newer heat pump models quote higher efficiencies of around 500%.

Heating costs for off gas grid homes are higher, and particularly so for those using older electric storage heating. While homes using storage heating are classed as using clean heating in the consultation, there is also clear evidence that tenants using these systems have historically experienced, and continue to experience, significantly higher levels of fuel poverty than those using other heating sources. Accordingly, these households are much more likely to benefit from a move to renewable heating, delivering both improved comfort at comparable or slightly lower costs than at present, and helping alleviate fuel poverty.

Consumer Scotland recognises that the balance of costs and benefits associated with clean heating systems can be changed at the level of individual homes by the use of additional measures such as solar PV, batteries and / or time of use tariffs[12]. However, these add to housing associations capital costs, and, in the absence of public funding, indirectly to tenants’ rent. We explore this issue further in the final section of our response.

We also recognise that off-gas homes are disproportionately concentrated in rural and remote areas, as well as in hard to treat buildings, such as high rise flats, in urban settings. In both cases, costs associated with insulation, heating systems and additional measures are likely to be higher than average.

We would therefore be more inclined to support Option 2, as set out in section 3.4.8 of the consultation (of targeting off gas grid homes initially), as being consistent with the principles set out in section 2 of the consultation. However, such an approach would need to be accompanied by appropriate, targeted resource to be successfully delivered.

Question 10: What are your views on whether neighbouring landlords could work together to reach such a target on a regional basis?

In principle, we would support this approach; it could offer benefits to tenants both through allowing economies of scale in contracting, and also in terms of targeting homes and tenants most likely to benefit from low carbon heating. It could also be consistent with delivery of Local Authority led Local Heat and Energy Efficiency Strategies (LHEES).

It may be less easy for this approach to be delivered in practice, however, in circumstances where one social landlord was effectively responsible for paying for upgrades in another landlord’s stock.

More widely, but in line with the same principle of reducing cost and maximising benefits, there may be circumstances in which social landlords could help facilitate take-up of measures among private owners or landlords in their area; this would be in line with the approaches demonstrated successfully in Scottish Government Area-Based Schemes and, some years ago, through Energy Saving Trust hotspot approaches.[13] We recognise that additional resource would be needed for social landlords to deliver this sort of wider role.

Question 12: To what extent do you support the requirement for mandatory connections to heat networks under certain circumstances?

Consumer Scotland recognises the need to support the financial viability of heat networks as they continue to expand across Scotland. We also understand the rationale for considering the social housing sector to support this as in some cases it could provide the anchor load of a larger heat network which could other domestic and non-domestic properties. We are generally supportive of providing powers to local authorities to encourage developers to connect new buildings to a heat network where they are within a heat network zone. However we would caution against making connections mandatory.

While mandatory connections could provide more certainty to developers and support the financial viability of heat networks it may not always be in the best interests of tenants.It is important to recognise that a heat network connection may not be the most technically feasible or cost effective solution for all properties / building types and uses within a heat network zone. It will be important to ensure that this is considered and accounted for when asking consumers within a heat networks zone to join a heat network.

Requiring mandatory connection may also remove the option for social housing providers to choose other approaches which may be more suitable for their tenants. The Heat in Buildings Bill consultation[14]  sets out proposals to require buildings within a heat network zone to end their use polluting heating. We would suggest that the Scottish Government consider a similar approach for connecting to a heat network for the social housing sector. This will still help to ensure that the Scottish Government achieve the ambitions set out in the heat network delivery plan2 while also encouraging social housing providers to consider the options available and what would work best for their tenants.

For properties which are connecting to a heat network, it is also essential that tenants are provided with sufficient information about their new heating system, such as pricing information, the heat source of the network and, most importantly given they will be on monopoly supply and unable to switch; customer support processes and how to access them. RSLs will naturally be the first point of contact for tenants, and there is an associated need to ensure they are resourced and trained to provide this advice effectively.

5. Exemptions

The consultation recognises that exemptions may be needed under some circumstances:

  • Where communal agreement is needed, but not reached, on the installation of measures needed to achieve the Standard
  • Where buildings are in a Heat Network zone, and social landlords commit to connecting to it by 2045; the minimum fabric efficiency level will still be required in this case
  • Legal barriers
  • In cases where homes will be disposed of
  • In cases of long term voids

Question 13: To what extent do you support the need for landlords to have an element of discretion to ensure measures are cost effective and in the best interest of tenants?

We strongly support the proposal that landlords should have an element of discretion to ensure measures are cost effective and in the best interest of tenants. Consumers vary widely in their needs and wishes in relation to both heating and energy use more widely, and landlords need the ability to be flexible in the way they achieve overall agreed outcomes for tenants, in line with delivery of the principles set out in section 2.

Where measures cannot be installed as a result of lack of communal agreement, we would support consolidation of housing stock where possible, including the provision of support for social housing providers to purchase properties in blocks of flats where necessary.

Question 14: What are you views, if any, on whether targets should be varied by guidance from the Scottish Government in specific circumstances?

Given the considerable uncertainties surrounding the current and future costs, benefits and timescales for availability of clean heating in particular, it seems reasonable for the Scottish Government to retain the ability to revisit targets.

However, the way in which this ability is exercised must be considered carefully and in consultation with social housing providers, and changes should be made only as a result of clear data and evidence. Social landlords make investment decisions on a long term basis, and short notice changes could result in unnecessary costs which might impact tenants’ energy bills, rent (through increases needed to pay for upgrades) or both.

6. Mixed tenure housing

The consultation recognises and describes the barriers to communal action faced by social housing providers seeking to improve flats in buildings without majority ownership. It also refers to ongoing work seeking to address this issue.

Question 15: To what extent do you agree than the new SHNZS should apply to mixed tenure properties?

Consumer Scotland recognises that the administrative aspects of delivery of energy efficiency measures in flats and tenements has been under consideration for some time. As the lack of such a methodology continues to result in detriment for some consumers who might wish to take action but cannot do so, we agree with both the analysis presented and the need for a solution.

However, we believe that clearer baseline data is needed to clarify the extent of the issue and to inform a more active approach, rather than simply requiring the standard to be met without providing additional tools available to social landlords.

Such an approach also needs to consider consolidation of properties through purchase and sale, and also the administrative capacity of RSLs to manage the process.

Question 16: Do you agree that for some blocks where the local authority or RSL is not a sole or majority owner, a phased approach to retrofit work should be undertaken?

A phased approach seems the most practicable option given current circumstances as described in the consultation.

7. Applying he SHNZS to gypsy/traveller sites

This part of the consultation considers energy efficiency levels in buildings provided for the use of Gypsy / traveller communities. At present, the amenity blocks are required only to meet EPC E standard, and the consultation proposes that these buildings should be treated in the same way as social homes under the new standard.

Question 17: To what extent do you agree than the new SHNZS should apply to Gypsy/traveller sites

As a matter of principle, we agree with this proposal. While we have not yet carried out any relevant research with this group of consumers, we are aware that research by other organisations[15] shows that the Gypsy/traveller community has been impacted by energy price rises and has also been disadvantaged through intermittent access to support measures.

8. Cost and funding

This section, taking into account previous estimates calculated for achieving EESSH2 (£3.7bn), suggests that the total cost of delivering measures needed to meet the new Standard will be considerably higher at a little under £6bn. Installation of clean heating systems is the main driver of additional cost. EESSH2 could be met while using gas or heating oil boilers, whereas SHNZS will require those systems – some 511,000 of which are installed at present – to be changed.

Two of the biggest challenges to the delivery of the SHNZS are:

  • the capital costs for landlords
  • the associated financial impact on tenants through increases to both their heating costs and rent

We expand on these issues below.

The consultation suggests a 2020 figure of £14,000 per house for installation of a heat pump, alongside new pipework and any necessary energy efficiency upgrades. Informal but consistent feedback from social landlords suggests that these costs are underestimates based on current practice. Reasons for this include the wider package of measures typically included by RSLs when installing heat pumps, and the additional staff costs of supporting tenants in the use of new systems.

Specifically, the headline cost does not take into account the additional costs of accompanying measures typically installed by social landlords (solar PV and / or batteries) to offset tenants increased electricity costs associated with new systems. Feedback from social landlords suggests that costs for individual homes in those circumstances are considerably higher when these additional measures are included.

There is a critical question about the sources of finance available to social landlords to roll out clean heating systems at scale. Our understanding, based on the work of the work of the Green Heat Finance Task Force, is that private finance is very likely to be available, but only given sufficient guarantee of return.

To provide that return, however, social landlords will need to repay both capital costs and any interest associated with commercial borrowing. The only significant sources of income available to enable (most) social landlords to repay those costs, under current arrangements, are Scottish Government grants and tenants’ rents.

Even were Scottish Government grants to cover a proportion of the capital costs, significant costs for individual houses could still plausibly be required. Paying back loans to cover those costs under current conditions would translate to significant increases in tenants’ rents, and would not be consistent with the affordability principles set out in section 2.

Further, significant falls in tenants’ energy bills would be needed to offset any such rises, again emphasising the critical influence of high electricity prices.

9. Timetable for the SHNZS

The consultation states that the new SHNZS will come into effect in 2025 at the earliest and seeks views on this.

Question 18: What are your views on the timetable for introducing the new SHNZS?

Consumer Scotland is not in a position to take a view on the timescale for introducing the new standard given the uncertainties associated with its costs, sources of funding, and lack of detailed data on technical challenges.

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