The Modernisation of Today’s Society

Energy is fundamental to almost everything we do. The availability of an adequate and reliable supply of energy is critical for economic development and improving the standard of living. The modernisation of today's society was made possible though the employment of technology which was and still is energised by fossil fuels. But we expect energy it to be available whenever we want, affordable and safe. Only when something goes wrong do we realise how much we depend upon extremely complicated energy systems. (Hinrichs and Kleinbach 2002). Throughout the world the real estate sector is accountable for around 30% of global carbon emissions and 40% of global energy consumption (RICS 2005). Being one of the largest sectors in both carbon emissions and energy consumption it was obvious that it should be targeted.

In the United Kingdom 28% of all CO2 emissions come from our homes and According to Gavin Killip (researcher in the Lower Carbon Group, Oxford University) the UK has one of the oldest, most inefficient stocks of housing in Europe, with two million homes that are officially unhealthy. It is well documented that dealing with energy inefficiency in the domestic residential sector helps reduce social illness from fuel poverty and poor housing, as well as the environmental issues of climate change and the reduction of green house gases. The world and UK government have realised that we need to change the way we live to help reduce our carbon emissions, to date there have been many changes made and reports conducted, some of which include, Low carbon buildings program, Energy performance certificates, climate change levy, carbon emission reduction target, climate change bill and the energy efficient target. There have been numerous organisations established to help make the general public more aware of the situation; these include the Energy Savings Trust NEED MORE NAMES.

The 'Energy Performance of Buildings Directive' (EPBD) was introduced through the Kyoto protocol. The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change. The Kyoto Protocol has outlined targets to which thirty seven major countries must meet. They must reduce their greenhouse gas emissions. Britain and Northern Ireland are to cut its greenhouse emissions by 12.5% of its 1990 level by 2012 according to the Kyoto project. According to the Department of Energy and Climate Change the UK is on track to almost double the reduction to 23% by 2012. In 2003 the European Union implemented the Energy Performance of Building Directive (2002/91/EC on the Energy Performance of Buildings). Its purpose is to "promote the improvement of the energy performance of buildings within the Community".

The European Union felt the best way to achieve this was to ask member states to ensure that when a building is built, sold or rented an energy performance certificate is made available to potential purchasers or tenants. Each member state is responsible for ensuring that an EPC is made available; within Northern Ireland the 'Department of Finance and Personnel' (DFPNI) are responsible under the Energy Performance of Buildings (Certificates and Inspections) Regulations (Northern Ireland) 2008.

For Northern Ireland energy performance certificates where made mandatory in the summer of 2008. They where phased in;

• 30 June 2008: Sale of existing dwellings.
• 30 September 2008: Dwellings and non-dwellings on construction.
• 30 December 2008: Rental of existing buildings; sale of existing non-dwellings.

In addition to producing energy performance certificates for the residential sector, regulations where also in place to implement certificates for large public sectors buildings over 1000square meters. These are known as Display energy certificates or DEC's. They are measured by the amount of energy the building uses and are updated annually. Energy Performance certificates for the domestic or residential sector last for 10 years.

The only exceptions from needing an energy performance certificate are:

• Places of worship.
• Temporary buildings in use for less than two years.
• Low energy demand buildings such as agricultural buildings.
• Stand alone buildings less than 50mA².
• Lease Renewals & Extensions.

Energy Performance Certificates can only be produced by registered domestic energy assessors (DEA). The assessors are accredited by approved accreditation schemes and must register annually with the national registrar. There are a number of different accreditation schemes available to become a certified assessor. There are also two different types of assessor, domestic and non domestic energy assessor (DEA and NDEA). Every EPC produced is recorded on the registrar along with the data gathered from assessing the property. The registrar in Northern Ireland is maintained by a company called Landmark. EPC record ratings for the energy efficiency of a building and the environmental impact of a building.

Domestic Energy Assessors are trained to Level 3 which is Domestic level only and gathers 'Reduced Data Standard Assessment Procedure' (RDSAP). An on-construction EPC is a form of SAP assessment and the assessor would record more info like u values of the materials used, orientation of the building, areas of walls and windows etc. He is what's known as an OCDEA (On Construction Domestic Energy Assessor). Homes built since September 2008 require an OCDEA to produce an On-construction EPC (or new build EPC). There are other certificates required for new builds like the design SAP Calculations and the As Built SAP calculations. BRE is a body called the Building Research Establishment who will provide training and qualifications for SAP assessors. They also have their own software for the production of EPC's and SAP calculations. There are many different bodies like BRE ie Stroma, NHER, and Elmhurst. Commercial rating is undertaken by assessors who are Level 4 and 5. Level 4 is for commercial and public buildings level 5 for production or industrial buildings.

• Aim of Dissertation:

Critically assess and analyse Energy Performance Certificates in the Residential lettings Sector of Belfast.

• Objectives:

1. 1. • Assess the impact of Energy Performance Certificates on the residential lettings sector.
      • Assess the views of current and potential tenants.
      • Assess the views of landlords.
      • Assess the views of Property professionals and Energy Assessors.

• Methodology:

There are distinctive differences between 'Quantitative' and Qualitative' research. In order to satisfy the stated aims and objectives the researcher must consider whether the research is to be of a "Quantitative" or "Qualitative" nature. (Williman, 2005). Quantitative research is 'objective' in nature. It is defined as an inquiry into a social or human problem, based on testing a hypothesis or a theory composed of variables, measured with numbers, and analysed with statistical procedures in order to determine whether the hypothesis or the theory hold true. (Cresswell, 1994).

Qualitative research is subjective in nature. It emphasises meanings, experiences, description and so on, the information gathered in Qualitative research can be classified under two categories of research namely, exploratory and attitudinal. (Naoum, 2006) Creswell aptly summarised the two concepts by suggesting 'Qualitative' research; the intent is to learn participants' views about a particular phenomenon. In respect of 'Quantitative' research, the intent is to see how data provided by participants fits an existing theory, thus the intent in 'Quantitative' Research is either to support or to refute an existing theory (Creswell, 2007).

Literature Review:

"Literature reviews help researches limit the scope of their inquiry, and they convey the importance of studying a topic to readers." Creswell (2003).

The idea of a literature review is that it will provide background information which will aid in the completion of this dissertation. A literature review will help develop a sound understanding of the research that has already been completed in the relevant field of study. A literature review is based on a sound and extensive knowledge of the chosen subject, this knowledge had to be generated by the studying of journals, reports, websites and newspapers.

As the introduction of Energy Performance Certificates happened in June 2008 then the majority of relevant information will be found on the internet as it is such a topical subject at present. There is also government legislation which provides a lot of relevant information.

The literature review is a key element of a 'Quantitative' study. The Literature review will assist the researcher in knowing which specific questions to ask, by developing issues and themes for the research and design process. To enable the researcher to carry out a meticulous review of the chosen area of study it vital that they consider all areas of associated literature. The researcher will also consider sources of secondary data. Secondary literature sources are those that cite from primary sources such as textbooks and newspaper articles, Naoum (2006).

The Lisbon Strategy:

Energy Performance of Buildings (Certificates and Inspections) Regulations (Northern Ireland) 2008.

This literature review will concentrate on the conventions and protocols that lead to the creation of energy performance certificates. Included in this literature review will be a detailed look at an actually EPC and political views from members of parliament and energy / property professionals.

Climate Change:

Climate change is a change in the distribution of weather over time. It can be a change in the average weather or a change in the distribution of weather events around an average. Anthropogenic factors are human activities that change the environment. One of the major causes of climate change is the amount of greenhouses gases in the atmosphere.

United Nations Framework Convention on Climate Change The United Nations Framework Convention on Climate Change (UNFCCC or FCCC) is an international environmental treaty produced at the United Nations Conference on Environment and Development. The UNFCCC main aim is to control the amount of greenhouse gases in the earth's atmosphere. The UNFCCC does not set any mandatory limits or guidelines to the amount of greenhouse gases but instead set protocols that would be compulsory and legally binding. The UNFCCC came into force on March 21, 1994 and at the time of writing the UNFCCC had 192 parties. Once the UNFCCC was formed it formed national greenhouse gas inventories. They used these inventories to set the benchmark levels for 1990. The Kyoto protocol uses these benchmarks to measure performance. The UNFCCC classified all members into three distinct groups;

• Annex I countries.
• Annex II countries.
• Developing Countries.

Annex I countries have committed to reducing their greenhouse gas (GHG) emission levels to targets that are mostly set below their 1990 levels. The UK must reduce there GHG by 12.5% of the 1990 levels by 2012. Annex II countries are simply a subgroup of Annex I countries and are members of the Organisation for Economic Co-operation and Development. The Annex II countries must pay the costs for the developing countries. Developing counties aren't required to reduce emissions under the agreement.

Kyoto Protocol:

This protocol is part of the United Nations Framework Convention on Climate Change (UNFCCC). All member countries of the UNFCC meet annually to discuss and assess it's progress relating to climate change. These meetings are known as Conferences of the Parties (COP). At the third COP, this took place in December 1997 in Kyoto, Japan the UNFCC adopted the Kyoto Protocol. Its aim is to combat global warming by controlling our greenhouse gas emissions which enter and harm our atmosphere. The Kyoto Protocol was established in Kyoto, Japan in 1997. To date 187 countries have signed up to the protocol. The United States of America is the largest non-member. When rejecting the protocol Mr. Bush cited poor scientific facts,"protocol emission targets not scientifically based". Bush claimed that America stands to loose 5 million jobs and a further $400 billion in revenue should the treaty be adopted.

The Economics of Climate Change 2007:

A 700 page report produced my Nicholas Stern and his team of economist at HM treasury for the British government. It discusses the effects of global warming on the world economy. The reports main conclusion is that early and strong action now will far out way the costs involved if no action where taken in relation to climate change. Stern stated that 1% of the global GDP would be enough to counteract the causes of global warming. However in August 2008 a report in the guardian newspaper quoted Stern that this figure should be increased approx 2% of GDP to account for faster than expected climate change.

One of the main conclusions of the stern review was:

"Emissions have been, and continue to be, driven by economic growth; yet stabilisation of greenhouse gas concentration in the atmosphere is feasible and consistent with continued growth". The review has come under some criticism however, the review, ultimately fails to provide a convincing case for spending a large amount of scarce financial resources on reducing greenhouse gas emissions (Eric Neumayer 2007). While other papers argue that human-induced climate change is not real (Byatt et al., 2006 ).

Fuel Poverty:

Currently, 203,000 families, representing 33% of households in Northern Ireland, live in fuel poverty (NEA, 2004a NEA, Fuel poverty: the health imperative, NIHE/NEA, Belfast (2004).Niamh Shortt, Jorun RugkA¥sa, 2007). Damp is one of the most common health hazards associated with poor housing and is largely a result of poor insulation and inadequately heated homes. In Northern Ireland social housing tenants spend a greater proportion of their income on energy needs than any other social group (Anon, 1997). The U.K. Home Energy Conservation Act (HECA) was established in 1996 to address energy consumption of the national housing stock. Improving the thermal performance of dwelling envelopes in existing social housing is a priority in Northern Ireland as 79% of total domestic energy consumption is due to space-heating (Anon, 1996).

SAP & RdSAP:

Within the UK the recommended method for measuring an buildings energy rating is 'standard assessment procedure' or SAP. This method calculates the amount of energy the building is using per annum. To calculate 'energy performance certicates' assessors use 'reduced data standard assessment procedure' or 'RdSAP'.

Political Opinions:

"Energy performance certificates make good economic sense" (Sammy Wilson 2009). The minister felt that making future tenants and home owners aware of the efficiency of the property will save them money on energy bills in the future. He felt that the more energy efficient properties will become increasing desirable and landlords will want to improve the rating of their properties.

Department of Finance and Personnel Northern Ireland:

The DFPNI are responsible for improving the energy efficiency of building in northern Ireland. They have introduced energy performance certificates and display energy certificates. They are the section of the government who are responsible for the introduction of the EPC's to Northern Ireland, responding to the European Union legislation 'Energy Performance of Buildings Directive'. Once this legislation was introduced the DFP have since been policing the matter. In a letter sent to all estate agents in October 2009 they stated that they would be visiting all agents to assess the number of properties that have an EPC available. They also noted that any property which doesn't have a valid EPC that the landlord could be liable to a £200 fine.

EPC Rating depending on Heating Type:

The following analysis shows the EPC rating for each of the three different heating types found from my sample data. The pie chart below shows the range of heating types. Gas central heating systems account for 56% and oil 43%. It is clear than Gas heating systems generally produce a better energy performance rating than that of oil fired central heating systems. 56.3% of gas fired central heating systems achieved a "C" rating in their EPC assessment. Whereas 46.3% of oil fired central heating systems achieved an "E" rating. Gas central heating systems also achieved many more "B" rated properties than oil. Economy 7 or electric heating systems are very poorly rated. However only 1 of the sample 155 properties did have this type of heating. My sample data did not contain data to show if the properties where double glazed, the year they where build or the type of insulation. All of these characterises effect the EPC rating also. As the Rdsap measures these elements to provide a rating.

On an Energy performance inspection the Domestic energy assessor or DEA will assess:

• Internal and external measurements of the property.
• Details of heating and hot water systems.
• Loft insulation measured and the presence (or not) of cavity wall insulation assessed.
• Details of window glazing.
• Wall constructions which will also include the thicknesses of wall.
• Details of internal lighting, if the bulbs are energy efficient or normal.

If certain elements of the property are not accessable the assessor can assume certain details. ie. If there is no access to the loft the DEA will assume insulation or not depending on other aspects of the property.

Does the EPC rating effect the Property desirability?

To assess desirability the sample property data contained the number of "viewings" each property had. It also contained how many days the property was on the market for. This was basically the day the property was advertised until the day the property was rented. A negative correlation between the number of viewings and the EPC rating of the property. The r squared value is 0.234, the closer this number is to one the better the data fits the model. When the correlation calculations are run in SPSS 17 the table above is produced. A peasrsons correlation of -.484 shows that there is a negative correlation. Therefore as the EPC rating increases the number of property viewings decrease.

The EPC rating compared to the number of days a property is advertised on the market.

The EPC rating of a property increases the number of days it is on the market will decrease. Therefore negative correlation exists between these two values. The r squared value of the regression line is 0.233, the closer this number is to one the more accurately the data will fit the model. Pearsons correlation is - 483, again proof that the two values are negatively correlated. Two bedroom properties - EPC rating vs Days on Market and Number of Viewings. When only the two bedroom properties are analysed the results are similar to all bedroom properties. There is some negative correlations in both graphs. Three Bedroom Properties - EPC rating vs Days on Market and Number of Viewings. Again when only three bedroom properties are analysed the results are still very similar. There is slight negative correlation between these values.

The negative correlation between the number of viewings and EPC ratings would suggest that the higher EPC rating the less people want to see / view the property. The negative correlation between EPC rating and days on the market would suggest that as the EPC rating increases the less time the property is advertised. Some would believe that the viewings should increases as the more demand for an energy efficient property the more potential tenants would want to view it. However, this is not the case. As a property increases in demand then tenants are much quicker to pay their deposit on the property to secure it, before someone else. Therefore it usually the case that on the most demanded houses there are significantly less viewings than less popular houses. When a tenant pays their deposit on a property the property is removed from the market and no further viewings take place.

               This would suggest that the higher the properties Energy performance rating the higher the demand for that property. This appears to be the case for all types of property, regardless of number of bedrooms or heating type.

Rental Price relating to EPC rating:

The study so far has proved that the higher the EPC rating the more demand for the property, as it is rented quicker than properties with lesser energy performance ratings. The following analysis will determine if there is any correlation between rental price and EPC rating. It is well documented that location is the most influential variable in the rental or sale price of any property. Therefore the analysis of the property data will be separated by relevant postcode to help minimise location variations. The price of a property is also determined by the number of bedrooms by which it contains. This will also be take account of. 

There is definitely a positive correlation between rental price and EPC rating in the two bedroom properties, however the correlation in the three bedroom properties is much less. The R squared value is 0.256 for two bedroom properties and 0.0240 for three bedroom properties which is extremely weak. The previous analysis focuses on the number of bedrooms each property has, however location is also a relevant factor in the rental price. Therefore the further filtered to allow for this.

The largest sample areas are BT10, BT12, BT6 and BT9. Therefore I will focus the analysis on these postcode areas. These four postcode areas account for 58% of all the data collected. There is slight positive correlation, however it is weak as both r squared values are 0.202 and 0.298. Which means that only 20% and 29% of the time would having a higher EPC rating result in a better rental price being agreed. However the property data when filtered to BT9 properties with two and three bedrooms only provided a small selection of properties to evaluate. Slight positive correlation, however it is very weak. There are only a very small sample number of properties once the data has been filtered to BT10 properties with three bedrooms. Therefore any correlation drawn from this small population may be incorrect.

 

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