Will Home Information Packs (HIPs) be ‘scrapped’?
The Home Information Pack (HIP) Industry:
- Employs around 10,000 either directly or through the provision of the constituent parts
- Feeds work to personal search companies, search departments of local authorities, domestic energy assessors, solicitors, IT designers and programmers and printers
- The value of the business in 2009 is estimated at £292,000,000. This is based on 900,000 HIPs at an average retail price of £325 before VAT. It is important to recognise that the volume of properties coming to market is at about 60% of the average through the cycle. This means that in an average year the market would be worth approx £490 million with VAT of £80 million.
- Generates around £44 million at 15% and £51 million at 17.5% to which VAT will soon return.
- Self regulates through the HIP Code and Association of Home Information Pack Providers.
- Innovates by producing new systems for automating the home selling and purchase process e.g. ready to exchange pack
The other main theme running through any consideration of the benefit or otherwise of the HIP is the Green issue.
Energy Performance Certificates (EPCs) are an integral part of the pack and are having a positive impact on the behaviour of consumers towards energy efficiency in their homes resulting in tangible carbon emission reductions.
EPCs are vital to the UK meeting its climate change obligations and research demonstrates that consumers are using the recommendations in the EPC to implement energy savings measures. Conservative plans to move EPCs to the end of the home buying and selling process would have a disastrous effect on the progress made to date and would be in breach of European law relating to the energy efficiency of homes. From a practical perspective Mortgage lenders have previously tested providing energy reports with their mortgage valuations but consumers totally ignored them.
Domestic energy consumption and efficiency are key areas which the UK is looking to improve upon in order to meet its climate change targets. Given that over 25% of UK carbon emissions are produced by domestic properties, it is vital that the benefits of the EPC are fully exploited.
The inclusion of EPCs in HIPs is demonstrably delivering the benefits for which they were designed:
- Over 95% of properties marketed for sale have an EPC because it forms part of the mandatory HIP. This is the one and only sector where compliance rates are high. In comparison less than 60% of dwellings marketed for let/rent have EPCs – meaning a non-compliance rate of over 40%. This includes the social housing sector, despite the direct role of CLG in funding and regulating the sector. Non-compliance in respect of the requirement to have a Commercial EPC on all non-domestic buildings marketed for sale or rent is running at 82%-92% according to a number of research studies undertaken by a variety of reliable sources.
- The EPC is designed to inform consumers about the energy efficiency of a home, so that they may consider it as part of their decision whether or not to make a purchase. Procuring the EPC as part of the HIP means that the energy rating graph can be (and is required to be) shown on the estate agents property particulars providing instant visibility of the energy rating for prospective purchasers.
- Recent consumer research shows that 69% of those questioned remember seeing the EPC during the home moving process (The Homemovers Report – June 2009).
- The same research shows that 32% read the recommendations contained in the EPC, were interested, and made some of the recommended improvements. A further 9% intend to make some of the recommended improvements in the near future (The Homemovers Report – June 2009)
- An independent ‘snapshot survey’ of 22 industry stakeholders, only one of which (AHIPP) has a vested interest in the provision of HIPs, showed that 17 stakeholders (77%) felt that moving the EPC to the end of the process would be a retrograde step. Only one felt that this course of action would be reasonable.
- The EPC acts as a means for consumers to realise the market value of energy efficiency, providing buyers with information they feel is important and allowing sellers to increase their asking prices for energy efficient properties.
- If moved to the end of the process non-compliance in respect of procuring EPCs will quickly escalate, consumer engagement will markedly reduce and the opportunity to maximise carbon emission reductions will be gone.
It is also important as part of this analysis to consider how HIPs are viewed by other interested parties. It’s essential that the Conservatives consult with stakeholders and other interested parties before making a final decision on the fate of the HIP.
What is being said about Home Information Packs HIPs and by whom?
At the Land Data Great Housing Market Debate in April 2009 a panel of experts, during discussion and debate on Home Information packs, unanimously agreed that “while packs had been poorly implemented they should not be scrapped but instead adapted and improved”
Kate Barker, former MPC member
David Miles, Chief Economist, Morgan Stanley
Michael Coogan, Director General, CML
Hugh Pym, Chief Economics Correspondent, BBC
Grenville Turner, Group Chief Executive, Countrywide
“Of all the Tories’ pre-election promises, the one I find the most bizarre is the obsession with abolishing Home Information Packs. Granted, the property market is on its knees with the lowest number of house sales for decades. But having said that, I have seen not a jot of evidence that HIPs have anything to do with this and I have not heard of a single seller – or buyer – who believes that the packs have been even a marginal factor. In fairness, the Conservatives did say that they would abolish HIPs even before they were made compulsory and the way they were introduced by this government can at best be described as a shambles. However, I have always been, and remain, totally unconvinced by the Opposition’s case against them (the LibDems are also anti), especially now that they’ve been around for over two years now and no one has died yet. Most packs cost under £400 and include a mandatory energy report. This would now have to be carried out anyway whenever a property is sold and would cost at least £150 on its own. So I cannot believe that the packs can possibly be a major factor in the sale of houses, many of which are worth 1,000 times that. Moreover, the main objectors to HIPs from the property world itself have always been the estate agents and the Law Society, while the consumer watchdog Which? has always been in favour. Who would you rather trust?”
Mira Bar-Hillel, Property Correspondent, London Evening Standard
“The current home buying process is one that fails consumers. While efforts have and continue to be made to improve it, while this market failure exists, Which? does not support the abolition of Home Information Packs (HIPs). Which? still believes the principle of a HIP is a good one. We support consumers being better informed about what is likely to be the biggest purchase of their lives – their home. This applies in particular to first time buyers who need better independent information. But HIPs in practice have been of limited value. The inclusion of the property information questionnaire was welcome but there is still much work to do to improve the home buying and selling process and to raise standards. In short, though HIPs were supposed to speed up house sales, reduce stress and hassle by empowering consumers and save consumers’ money, the jury is still out.”
Mark McLaren, Which? Public Affairs and Policy
“EPCs have the potential to be valuable tools in raising awareness of the energy performance of homes and in encouraging change. It is key that ‘first day marketing’ of EPCs remains in place. The EPC label should feature on the front of the particulars of properties for sale and/or rent to enable people to become much more familiar with the energy ratings of homes and therefore, associated running costs. The EPC rating should also be required to feature in all marketing material, including estate agents’ windows, press and internet advertising for sales and lettings.”
Colin Butfield, Head of Campaigns, World Wildlife Fund
We are firmly behind EPCs playing a major role in the home buying process and, therefore, they should be a priority in all vendor pre-purchasing surveys. Indeed, they are essential part of the important process for moving forward the UK’s existing housing stock towards zero-carbon ratings by 2050. To place EPCs at the end of the priority list would be a retrograde step.
Andrew Leech, Executive Director, National Home Improvement Council
The Law Society is currently consulting on proposals for a membership scheme that would explore “the development of completion-ready packs (taking HIPs to their logical conclusion)”.
Law Society, Improving Residential Conveyancing, June 2009
The National Association of Estate Agents do not appear supportive, but I question whether their view is representative of all their members, and furthermore whether their view would change if the first day marketing regulation was once again suspended.
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