Tax Breaks and The Construction Of Sustainable Hom

Over the next ten years, the Prime Minister plans to build one million 'green homes' as a result of the World Environmental Summit in Johannesburg last August. The radical plans were proposed as a desperate attempt to reduce the UK's CO2 emissions and energy wastage, thus demonstrating Britain's commitment to sustainable development. The idea is that the construction or refurbishment of houses and flats would attract tax breaks if they meet 'sustainability' targets, and penalties if they fail.

It could mean reduced stamp duty for green homes, support for 'sustainable refurbishment', cuts in VAT for insulation, draught proofing and double glazing materials, and the imposition of VAT on new homes that miss targets.

The aim would be a generation of green homes with features such as solar panels, energy saving boilers, triple glazing and insulation.

New houses would use environmentally friendly building products such as timber from sustainable forests, lime based mortars and environmentally friendly paints.

Some 140,000 new homes are built in Britain each year, but the number using anything other than a conventional approach runs into just hundreds.

Countries like the US and Germany, however, are already well ahead of the UK with such housing developments.

The few new homes that are built to use energy from renewable sources are often the product of a housing association, keen to demonstrate a more environmentally friendly way of house building and reducing energy bills for their low-income tenants.

Meanwhile the bulk of new homes, (those sold for the mass market), continue to guzzle the gas and pump out the CO2.

At the same time, houses are being packed with even more energy-using gadgetry in the form of domestic appliances and home entertainment systems.

The idea of a target of 1 million sustainable homes was first put to the government by the environmental group World Wildlife Fund (WWF), and was well received by John Prescott, the Deputy Prime Minister, who has responsibility for planning and housing.

Mr Prescott earlier this year launched a 15-year housing plan, which introduced many of these new environmental standards.

In February 2003, the Office of the Deputy Prime Minister published the sustainable communities Plan.

The plan recognises the need for sustainable construction in order to maintain sustainable communities and sets out spending patterns to achieve such targets.

Benchmarking progress The building research Establishment, a government agency that advises on construction standards and building regulations, says homes built with new techniques can use as little as 10% of the energy needed by conventional buildings.

It has set a new voluntary construction benchmark - the Eco Homes standard.

This assesses homes on measures ranging from energy efficiency and water usage to proximity to public transport, and classes them on a four point scale: pass, good, very good and excellent.

A recent report from the environmental consultant ERM, looked at how taxation could be used to promote sustainable housing.

It suggested that homes meeting the Eco Homes 'good' standard should benefit from the removal or reduction of stamp duty, along with a substantial reduction in VAT.

It went on to further recommend the removal of VAT from insulation, triple glazing, lime mortars and other energy saving materials.

Tax breaks were also recommended for the use of sustainable materials in refurbishment projects.

The cost of a sustainable future Prime among the obstacles to adopting renewable energy is cost.

Several trials of sustainable housing in Britain show that such homes cost about 30% more than conventional ones.

Most of the extra cost is because the buildings are one-offs where design and construction do not benefit from economies of scale.

Properties embracing green features tend to remain well above the average price.

For example, several new homes at the Prince of Wales' Poundbury development in Dorset will be constructed using sustainable materials such as lime based mortars and environmentally friendly paints.

In addition, they will have solar heating, water recycling, ventilation that recycles 'used heat' and heavily insulated walls.

They are not yet priced, but demand prices in Poundbury are almost 20 per cent above the Dorset average.

However, the ultimate sale price will be dictated by demand rather than build cost and there is increasing evidence to show that demand for sustainable housing is growing.

Experts say that once green home building is widely taken up, costs will fall to about 5% above those of conventional construction - a difference easily wiped out by VAT reform.