Regulations banning the installation of oil and gas heating systems in new-build properties in Scotland will lead to fewer homes built at greater cost to developers and residents, industry experts have suggested.

Sector body Homes for Scotland, which represents organisations collectively delivering the majority of the country’s new homes of all tenures, has called for the launch of a public information campaign to make buyers and owners aware of the fundamental changes and potential costs associated with the New Build Heat Standards (NBHS) that came into force on April 1. The group is further concerned about proposals to bring forward subordinate legislation in December for a new “Scottish equivalent standard” to Passivhaus, a more rigorous set of design criteria for very low energy buildings.

Estimates vary widely on the additional expense of incorporating heat pumps or similar “clean” heating systems mandated by NBHS into new home construction, though most agree that the cost will be borne by builders, buyers and renters alike.

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“Home builders and the supply chain will be able to absorb some of these costs but regrettably many will have to be passed on to buyers in the form of higher capital cost for the purchase of their property,” said David Petrie, external affairs manager at Homes for Scotland.

Although NBHS came into effect at the beginning of April, all building warrants approved prior to that date have a three year lead time for construction to be completed. This means no developers are currently compelled to build to the new standards, though some are voluntarily including low-carbon features on specific projects.

Mr Petrie said it is therefore “too early” to analyse the impact of NBHS on housing delivery. However, he said it is adding complexity and cost in “an already challenging environment” reflected by official Scottish Government statistics which show that new home completions fell by 11% last year to 20,992, while new starts plunged by 23.5% to 16,017.

Stephen Kelso, product design manager at housebuilder Cala, said the group has already been working towards the removal of fossil fuels from its homes as part of its sustainability strategy. This has included the use of hybrid heating systems for “several years”.

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“The transition to air source heat pumps – a key requirement of the recent New Build Heat Standards – is a natural next step for Cala and we are already implementing the technology on some sites,” he said.

Builders predict underfloor heating will become increasingly prevalent as this works well with heat pumps. Other energy saving technologies such as solar panels and battery storage solutions are also expected to become more widespread.

Kirsty Henderson, head of design and sustainability at Cruden Homes, said it will not be necessary to adapt the internal footprint of new homes to suit low carbon heating systems but there “can be” a requirement to find space for additional equipment. That said, overall footprints may have to increase to maintain internal floor areas as wall thicknesses increase. 

She said the cost of delivering a low carbon home is anticipated to be in the region of an additional £15,000 to £25,000 per property, but it is hard to be definitive until guidance and benchmarking is confirmed.

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“This is a cost house builders are likely to have to absorb fully, because despite increasing awareness of environmental issues, home buyers simply aren’t ready to pay this premium,” Ms Henderson said. “Other factors such as location and schooling always prevail in the hierarchy of housing ‘wants’ and have a greater influence on value.”

An impact assessment by the Scottish Government puts the estimated cost of a typical air source heat pump in a new build at £15,148 versus £6,723 for an equivalent gas boiler. Assuming this is passed on in full to the home buyer it would add about £8,425 to the purchase price, or an extra 3%.

But the assessment also adds: “Note that the technology costs exclude Value Added Tax (VAT), and the cost differential may be more or less than £8,425 depending on the design and specification of the system, as well as prevailing market conditions.”

Research carried out by Homes for Scotland among its members estimates NHBS will add £485 annually to the cost of a 2-bed mid-terraced home, based on increased energy, mortgage and maintenance expenses. Achieving a Passivhaus Standard would add a further £1,056 on top of that, resulting in £1,541 greater costs each year for a Passivhaus standard home when compared to a new build under 2023 standards.

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Gordon Nelson, director for Scotland at the Federation of Master Builders, said NBHS is a step forward towards ensuring that new buildings will contribute positively towards environmental goals but also challenges the construction industry to innovate and adapt.

“While the NBHS has been a topic of discussion among FMB members, it hasn't been as pressing an issue as skills shortages, rising cost of materials and the lack of builder licensing, for example,” he said. “Nevertheless, the NBHS significantly impacts FMB members involved in housebuilding, particularly in relation to affordability to meet these new sustainability standards.”

The Scottish Federation of Housing Associations (SFHA) has warned that the installation and maintenance of new clean heating systems will require significant investment by social landlords already hard-pressed after the recent cut of almost £200 million from Scotland’s affordable housing budget. That followed years of shortfalls in the construction of social housing which led First Minister John Swinney to declare a nationwide housing emergency earlier this month.

Responding in March to the Scottish Government’s consultation on the Social Housing Net Zero Heat Standard, the SFHA said that in the absence of additional grant support there is a real risk of costs being passed on to tenants through higher rents. Funding for new housing development could also be impacted.

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It further cautions that energy efficiency and clean heating requirements must be “realistic” and ensure that moves to lower carbon emissions remain compatible with fuel poverty targets.

“The social housing sector knows from experience that these two objectives have complex interactions, and so every effort should be made to ensure that unintended consequences do not arise which could leave tenants worse off,” the SFHA said.

“For example, the installation of clean heating (or an inappropriate clean heating system) without adequate energy efficiency measures could lead to higher energy bills for those moving from a relatively cheap to run gas boiler. To help mitigate against the risk that fuel poverty levels could be inadvertently exacerbated, work is needed to address wider issues, including access to smart meters and the rebalancing of gas and electricity prices.”