HIPS are happening
Speech by Yvette Cooper MP at the second Association of Housing Information Providers Spring Conference on 18 April 2007.
Introduction
Thank you to Mike Ockenden for the introduction. With just six weeks
to go until the introduction of Home Information Packs (HIPs), this is
an important time to set out the government’s approach to reform of the
house buying and selling process - in the interests of consumers, and
the environment.
Communities Secretary, Ruth Kelly has made clear that HIPs including
Energy Performance Certificates will be introduced on 1 June. They will
help home owners cut fuel bills and carbon emissions from their
homes. And they are part of a process of reform of home buying and
selling to introduce greater speed, transparency and competition to cut
costs and improve services for consumers.
Most people recognise that reform is long overdue. The home buying
and selling process has barely changed for a generation. Other
industries and markets have seen substantial changes driven by
competition, consumer expectations, new technology and innovation -
driving down costs, improving efficiency, increasing the range and
variety of services, and speeding up the process. Not home buying and
selling.
In fact the reverse has happened. In many areas the overall cost of
the industry services you need to buy and sell your home has gone up
considerably faster than average earnings. Estate agents fees for
example in many areas have gone up in line with house prices – and have
doubled in the last ten years as a result.
Yet overall services have hardly changed. And the process has got
slower too. Instead of productivity improvements and the internet
speeding up the process, evidence suggests that it takes longer to move
from offer to exchange than ten years ago. The result is that there can
be long periods of waiting and delays when sales can fall through, with
considerable extra costs, waste and duplication, for both buyers and
sellers.
And there has only been limited change in response to changing
consumer expectations. So for example the growing need and demand for
environmental information about homes is not yet being met by the
industry.
The government believes the current process does not serve
homeowners or the environment well. Of course, buying and selling a
home may well have always been a stressful experience for many of
us. But we all know the process could be improved. Lack of transparency
and effective competition and innovation mean that consumers can often
end up paying more than they should, and coping with far more stress
and uncertainty than they should. They also get none of the important
information they need about the energy ratings of their home.
All that is starting to change. The introduction of HIPs, the
establishment of energy performance certificates, the development of
Home Condition Reports, the introduction of e-conveyencing, far greater
use of the internet; all of these are creating a climate for
innovation, change and competition in the interests of consumers and
the environment. Many organisations are already innovating and
responding to the need for change.
Of course there are some in the industry who after a generation of
operating in the same way still feel uncomfortable or threatened by
change. But change is needed for consumers, and it is important that we
see new innovation and competition to deliver home buyers and sellers a
better deal.
Energy Performance Certificates
Indeed the most important element of the Home Information Pack is the Energy Performance Certificate.
The challenge from climate change has become increasingly
serious. Already our planet is 0.7 degrees warmer than it was a century
ago. As the recent Stern report made clear, if we carry on like this
there is at least a fifty fifty risk of the planet’s temperature rising
by 5 degrees by the end of the century. That’s a big enough increase to
threaten major world cities with rising sea levels, devastate crops
across entire regions, create millions of refugees and lead to the
extinction of iconic species such as the polar bear. The environmental,
economic, and social consequences could be devastating.
And it isn’t enough to expect other countries - China, India, or the
US - to cut their carbon emissions. After all, carbon emissions per
person in the UK are three times higher than in China, and four times
higher than in India. This country also needs to cut its carbon
emissions if we are to persuade other countries to act as well.
Therefore, with housing accounting for a quarter of carbon emissions
here at home, we need to do more to help householders and home owners
who want to improve the energy efficiency of their homes.
The home buying and selling industry should seize on the opportunity
created by Energy Performance Certificates to do its bit to tackle
climate change.
From 1 June all homes put on the market will have to have an energy rating - similar to the ratings fridges get.
For the first time home buyers and sellers will get proper information about the energy efficiency of their home.
For the first time they will get proper information about the energy
running costs of their homes - one of the most important ongoing bills
they will face.
For the first time they will get practical advice on how to cut their fuel bills and to cut their carbon emissions too.
We get energy efficiency information on our fridges and washing
machines, our freezers or our tumble driers. Its about time we had it
for our homes - the biggest investment most of us ever make.
New research shows this is the information people want. According to
You Gov, more than two thirds of people (72 per cent) want more
information about the energy efficiency for the homes they are buying.
And it could help home buyers cut their fuel bills. The Energy
Savings Trust estimates that householders could save around £300 per
year as a result of basic improvements to their home. And even if only
one in five home owners actually make the basic changes recommended, it
could still cut carbon emissions by the equivalent of taking 100,000
cars off the road.
For example, every year around 400,000 homes which could benefit
from cavity wall insulation are bought and sold in the housing market.
Yet many of those home buyers will have little idea that they even have
cavity walls, never mind knowing if they need insulating. And how many
of us know anything about the lagging in the loft, or the efficiency of
the boiler when we buy and sell our homes.
Energy Performance Certificates will tell people about the energy
efficiency of their homes as well as listing simple steps which can
help save money.
But we want to go further. We want to make it easier for home buyers to improve their homes too.
That is why we are working now to link Energy Performance
Certificates with grants and loans - from mortgage companies, energy
companies, local councils and government schemes.
Already we have been talking to mortgage companies about developing
green mortgages, and several have now said they are interested in ways
to deliver green finance to help people invest in energy efficiency for
their homes.
And we want to link Energy Performance Certificates to the Energy
Savings Trust and the grants and support from energy companies provided
through the Energy Efficiency Commitment too.
We want to see home buyers with poorly rated homes able to get extra
support. From 1 June we want home buyers to be able to get an energy
rating as well as easy access to help to make changes that the energy
certificate recommends. Average home buyers purchasing E,F or G rated
homes should be able to qualify for £100 - £300 support to help with
better insulating their homes. Depending on their personal
circumstances or the nature of the improvements needed, they may be
able to get even more help.
And we want to see practical measures to make it easier as well -
including one stop shops to get home buyers reliable quotes and ways to
get the work done without too much hassle. The Energy Savings Trust
already has a network of energy efficiency centres we can build on. But
we need to do more.
So we will be meeting with energy suppliers, local authorities, the
Energy Savings Trust and others - to look at ways to make it easier for
home owners who want to implement Energy Performance Certificate
recommendations. And we would like to see more innovation from the
private sector too to look at ways to help home buyers with their new
EPCs.
Over time Energy Performance Certificates will change attitudes
towards homes and the way we live. Over time Energy Performance
Certificates will help people transform their homes to save money and
help the environment.
And we welcome the strong support for Energy Performance
Certificates from environmental groups such as WWF, Friends of the
Earth and others. We welcome too the strong interest in becoming energy
assessors, with thousands now in training. Latest estimates suggest
that 2,500 energy assessors will be needed in June and that 3,000 will
be qualified by then with more coming through quickly after. And we
welcome the support from consumers who have said clearly that they want
energy information about their homes.
That is why it is so disappointing that there are still some in the
industry opposing energy performance certificates or trying to water
them down. It is frankly disappointing to see vested interests placed
ahead of the needs of the consumer and the wider environment. The
challenge instead to all in the home buying and selling process should
be to seize on the opportunity from HIPs and EPCs to help home buyers
get their bills and their carbon emissions down.
Speed Transparency and Competition
That is why we believe EPCs are the most important element of HIPs.
Indeed they are the only new compulsory element. Otherwise, HIPs simply
collect together the legal information and searches that are already
provided and paid for in the home buying and selling process.
Yet when introduced alongside e-conveyancing, new redress
arrangements, the growing use of the internet HIPs have several clear
advantages over the current process. Providing the information early
and clearly will make the process faster, more transparent and bring in
greater competition to push costs down.
For a start, providing the information at the beginning speeds up
the process, and allows less time for additional problems to emerge
which mean sales fall through and chains collapse.
Leasehold documents can take ages to come through. Delays with local
authority searches can confuse and hold up the process. And where Home
Condition Reports are included, buyers know what they are getting and
there is far less chance of late prevarication when new problems emerge.
Introduced along side e-conveyancing and the growing use of the
internet, HIPs have substantial potential to speed up and smooth the
home buying and selling process. Documents which used to take weeks to
arrive (with home buyers baffled as to whether it was their solicitor,
the local authority, the seller’s solicitor or someone else entirely
responsible for the delay) could be in place on a website in a matter
of hours.
Secondly, as well as introducing greater speed, we will see greater transparency .
Right now many home buyers and sellers find it hard to get clear
exactly what services they are paying for. For example, few have any
idea what searches cost or how long they take. Even fewer are aware
that there are different search providers to choose between. The price
of local authority searches varies from £55 to £269. The length of time
can take from a matter of hours to up to 30 days. Private search
companies also offer a range of costs and services. Yet the fact that
most consumers have little idea who is doing their searches, and how
much they cost (until the solicitor’s bill arrives at the end) means
there is no serious incentive for competition on price or quality of
service. As a result there is little incentive for price competition or
pressure to bring costs down. Similar problems with the lack of
transparency and price competition affect other parts of the process
too.
Home Information Pack providers will have to compete on price and
service at the beginning of the process, making much clearer to
consumers what services they are providing and how much they cost.
Already there is evidence that reforms are improving competition.
New providers are entering the market already. New companies are
already cutting costs and prices too. One provider has said they will
offer HIPs for free. They reckon they can cover the costs easily and
still undercut average estate agents fees. We’ve seen some online HIP
providers offering the whole package on the internet - you don’t even
have to print out a single page - at lower prices than many current
services for searches and surveys. HIP providers and other
organisations who are pushing up costs or charging higher prices should
expect to lose business and be undercut. Already some local authorities
are starting to cut search costs and speed up services, knowing that
they will otherwise lose business to the competition when HIPs come in.
Further reforms of searches are needed as we have said, but we can be
clear that the pace of those reforms will be faster because of HIPs.
Wider Review
We want to see this as a wider programme to improve the services and cut costs in the interests of the consumer.
Of course, HIPs are just part of the process. We are introducing new
redress arrangements in Parliament through the “Consumers, Estate
Agents and Redress Bill” responding to some of the issues investigated
by the Office of Fair Trading. And we are continuing to work on the
development and take up of Home Condition Reports through the area
trials.
And as Ian McCartney set out for the House of Commons, we will be
monitoring developments closely, we now intend to undertake a full
review of the home buying process, to look carefully at consumer
redress and responsiveness and the extent of effective competition.
Conclusion
So HIPs is the start of a process of change and will open up new
possibilities. What they do is enable a market place that has been
stuck where it is now for decades to move forward, to take full
advantage of modern IT and communications.
HIPs are a good opportunity to improve competition, including on
price, and get a better deal for consumers. The Government’s view is
clear: consumers are the priority. They haven’t had a good enough deal
in the past. We want them to get a better deal in future.
Speech by Yvette Cooper MP on 18 April 2007.
