Reflections on the AECB Conference
What a great day, with wonderful people, inspiring projects and challenging discussions!
There was a lot of talk about the cost of retrofit in particular, but also the uplift between regular building and AECB or Passivhaus.
As part of the final panel, I pointed out that the building industry as a whole is suffering from massive inflation in the cost of everything. People generally rush to label environmental measures as disproportionate and demand a quicker ‘payback’.
But we need to fundamentally change the way we frame retrofit altogether. Retrofitting is unavoidable. Even if we conveniently place the climate crisis to one side, we are faced with a housing stock that was majority built circa 100 years ago or built as a temporary measure.
Nearly every project we approach for retrofit has a roof reaching the end of its natural life, some sort of damp issue, often structural issues, electrics and/or heating and plumbing upgrade required and they almost never have an active ventilation strategy in place. This is without even mentioning insulation or airtightness, which is most often practically non-existent. This means that the majority of our homes end up being cold, impossible and/or expensive to heat.
We live in a country full of inadequate housing. This is a fact we need to wake up to. If the Victorians were in our situation, with the knowledge we now hold about how to create healthy, warm homes, they would flatten everything and start again! For obvious carbon, cost and heritage reasons, we are not going to suggest this!
One of the points made by the wonderful Rachael Owens last week, is that we as a society have become used to accepting a lower standard of housing. If someone, say for example, a housing association or developer, acquires properties which are in a state of disrepair, there is a bear minimum expectation in terms of providing a fit for purpose, sanitary kitchen, functioning bathroom and a basic level of presentation. Nobody asks about the payback period for these elements, because they are considered the necessary for an adequate home.
What about a healthy home? Should it not be that a healthy and safe home is the minimum we should expect. We are at a point in time where we have the knowledge; we know what makes a home healthy and safe and how to achieve this. Yet we are too busy debating whether it is good value for money. We need to raise the bar and our ambitions.
Finally, I can’t resist mentioning VAT. Anyone who says that retrofit is zero rated is wrong. Anyone who says retrofit is not zero rated is wrong. Here’s why…
I am not a VAT expert. However, I have read VAT Notice 708/6 many times. My understanding (and I would gladly be corrected on this) is that any work you do which is associated with the primary function of insulating or improving energy efficiency on your building (measures specifically identified within the guidance) should be zero rated. If you are taking render off a wall to insulate it, the work associated with this should be zero rated. If you are insulating something because you have to under building regulations, as part of wider works where the primary purpose isn’t to improve energy efficiency then this is not zero rated. Clear as mud right?
We have found builders who are happy to charge VAT as they feel appropriate, based on this guidance. This may mean splitting a Contract into ‘thermal works’ and ‘remodelling’, or it may mean clearly identifying the separate measures within the invoicing and contract. However, Bill Butcher made the very valid point that it is the builder who ends up taking on the risk of deciding what is zero rated VAT and what is standard rate VAT. This seems supremely unfair.
I have spoken to more than one accountant who can’t tell me the right approach with this. So why do we feel it is appropriate to place this burden on builders, who majority will not have formal training in this area?
I understand that this is a potentially complicated subject, so I would like to propose a solution to simplify things. Make all AECB or Passivhaus standard retrofits Zero Rated VAT.
So, Kier Starmer, what do you think?