The house building industry body Homes for Scotland (HFS) recently called on the Scottish Government to ‘pause and review’ the proposed Scottish Passivhaus equivalent policy for new homes, which would introduce minimum environmental design standards for all new-build homes. The policy, put forward by Labour MSP Alex Rowley and supported by the Scottish Government coalition, is due to be adopted as legislation in December 2024.

It has popular backing (receiving 97% support in the Scottish Climate Assembly), as well as considerable cross-party support. HFS argues that raising housing standards may impede delivery and exacerbate the housing availability crisis. It is not the first time such arguments have been raised but is there any truth to them? Disentangling the underlying issues around the housing supply crisis from the smokescreen thrown up by the house-building industry is vital if sustainable long-term solutions are to be found.

The shortage of affordable homes in Scotland is palpable, with almost 5% of the population on a waiting list for social housing. As a consequence, several councils have declared housing emergencies. The number of new home completions has fallen to less than half of its high point in 1970.

At first glance, the idea of building homes to more rigorous environmental standards, such as the Scottish Passivhaus equivalent, might seem to be a potential obstacle to more homes being delivered. However, UK Government studies looking into factors affecting housing supply did not find higher standards to be a constraint.

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On the contrary, the 2018 Letwin Review of Build Out stated that, “the homogeneity of the types and tenures of the homes on offer on these sites, and the limits on the rate at which the market will absorb such homogenous products, are the fundamental drivers of the slow rate of build out”. The UK Parliament’s 2023 report, Tackling the Under-supply of Housing in England, identified a range of solutions to stimulate housebuilding, including the need for more suitable land being brought forward, and properly-resourced local authority planning departments.

It is likely that the speculative nature of housebuilding plays a key role in the housing crisis. Speculative housebuilding (which accounts for over 50% of Scotland’s supply) occurs when private developers obtain land, secure planning permission and construct homes without knowing in advance who will buy them, or for what price.

The 2024 Competition & Markets Authority (CMA) market study of Scottish housebuilding commented that, “housebuilders that build homes for private sale have an incentive to match, but not exceed, the absorption rate”. To tackle the shortfall of affordable housing, the CMA recommends an increase in the “delivery of publicly-funded housing by local authorities or housing associations”.

To address this issue, the Scottish Federation of Housing Associations is calling on the Government to increase the Affordable Housing Supply Programme budget by at least £700m. A number of mechanisms including support for energy-efficient self-build homes, and incentives to build to higher performance standards could help stimulate the supply of new homes.

Building to the Passivhaus standard has an estimated uplift of 4-8% compared to current standards. Since residential land in the UK typically comprises around 67% of the total property value, an uplift of 6% in the build cost would only equate to less than a 2% increase in the final house price. Moreover, the additional costs of building to a higher standard will come down when delivered at scale. Any uplift resulting from building to a higher specification could be absorbed through adjustments to land values, as has happened with previous regulatory changes, thus not increasing housing delivery costs and not limiting supply. Homes are already being built to higher standards at a local authority level elsewhere. London councils work to the higher standards set out in the London Plan, which seeks to ensure that more homes are delivered whilst also improving energy efficiency. It is likely that supplying energy efficient housing in a market where energy prices are continually rising could actually stimulate market demand for better quality housing thereby increasing the overall supply. The Batiment Exemplaire (BatEx) programme, established by the city of Brussels is a well-known example of a policy that helped stimulate rapid growth in sustainable housing delivery.

Approximately one-third of all Scottish households are currently in fuel poverty. A Scottish Passivhaus equivalent would deliver newbuild housing that will cut heating demand in Scottish homes by up to 80%. It would also bring numerous wider benefits to society, reducing the need to spend money on expanding electrical grid infrastructure and helping Scotland to meet its climate targets. The societal benefits of this transition will far outweigh any incremental increase in housing building costs.

It is incumbent on the Scottish Government to stand firm in the delivery of a ground-breaking policy that will radically cut energy bills for Scottish people whilst revitalising the housebuilding sector.

Robert McLeod is a Professor of Building Physics and Sustainable Design at the Graz University of Technology, Austria. He is a Fellow of the Institute of Mechanical Engineers and was one of the first certified Passivhaus designers in the UK, qualifying at Strathclyde University, in 2009. He is co-author and editor of “The Passivhaus Designer’s Manual: A technical guide to low and zero energy buildings