A Report: The Cost of Ignoring Poor Housing
Recent research from the Building Research Establishment or BRE has tried to accurately assess what the costs of failing to act on poor quality housing in England might be. The report says that, potentially, investing £9bn in improving housing could save £135.5bn over the next 30 years – as well as having many other benefits. In this article we will look at what this research has found and at what we can learn from it.
Who are the BRE?
BRE is a so-called ‘profit for purpose’ organisation which operates in the UK and worldwide. BRE works to generate new knowledge through independent research. This is used to create products, standards and qualifications that aim to make buildings, homes and communities safe, efficient, productive, sustainable and enjoyable places to be.
How this research was conducted
The methodology behind this research is quite complex. Further details can be found in the research itself. However, in simple terms, BRE’s research is a cost-benefit analysis. It estimates the cost implications of poor housing, in terms of health and other costs, and sets them against the benefits housing improvements might produce.
The research was based on statistical analysis. It did not, for example, involve the inspection of individual properties.
The research builds on BRE’s previous research on the subject. It uses widely accepted data from sources including the 2019 English Housing Survey (EHS) and EHS Housing Health and Safety Rating System (HHSRS) data. The report defines ‘poor housing’ as housing which fails to meet the statutory minimum standard, ie. it has one or more Category 1 HHSRS hazards. It says there are 2.4m such properties in England. The research has estimated the cost of repairing these properties so that these hazards are no longer present.
The research has estimated the costs to the NHS for treating health issues caused by housing hazards as well as the wider costs to society if these hazards are unmitigated. It considers the ‘pay back period’ of doing this.
Key takeaways from the research
The BRE research asserts that, without urgent action, poor quality housing in England will cost over £135.5bn over the next 30 years.
It estimated that it is costing the NHS more than £1bn annually, in first year treatment costs alone, to treat people who are affected by poor housing.
The research says that spending £9bn now to improve 2.4m of the poorest quality homes in England would pay for itself within 9 years based on savings on NHS treatment alone.
The research finds that there could be a wider ‘social payback’ involved with doing this of £135.5bn over the next 30 years. These benefits include savings to the NHS, lower energy bills and carbon emissions, higher property values and improved economic opportunities as a result of improved health.
According to BRE’s analysis, more than half (£857m) of the annual NHS treatment bill can be attributed to defects in homes which expose residents to excessive cold. It says this can exacerbate conditions such as COPD, arthritis, strokes and heart attacks.
Improving 65,000 homes with a Category 1 damp and mould hazard now would only cost £250m but would produce a £4.8bn benefit to society over 30 years
In separate research published earlier this year, BRE reports that excess cold is most prevalent amongst properties that are owner occupied or privately rented – these homes are more likely to have the poorest EPC ratings (band F or G).
The research says that over 500,000 owner occupied properties and 200,000 PRS homes fall into this category. It says that this compares to just over 20,000 social rented homes within this category, and that this is due in part to the Decent Homes Standard in the social housing sector.
Costs and benefits – an example
The BRE research provides a case study which may be of particular interest to PRS landlords and investors. It illustrates the potential financial implications of a poor quality property and estimates what the financial, health and environmental benefits of making housing improvements might be.
The study uses a fictitious example of a 1980s-build ex-local authority property which is now let to a tenant. The property has a number of defects: The flat roof leaks, the walls are wet, and there is evidence of damp and mould. The property lacks effective roof and wall insulation and one first floor bedroom over a vehicle access way has an uninsulated floor. The house has an inadequate heating system, which also means the occupants cannot afford to heat it properly.
The property has been assessed as having a Category 1 HHSRS hazard relating to damp and mould growth. It also has a high scoring Category 2 HHSRS excessive cold hazard due to the inadequate heating system.
The example assumes that a programme of work is carried out at a cost to the landlord of £18,000. This includes roof repairs and insulation, new ceilings to the upstairs rooms, cavity wall insulation, part floor insulation to the first floor, a new efficient gas central heating system, replastering and redecoration.
The study then calculates some ‘before’ and ‘after’ numbers. (2019 costings are used.)
Before improvement: The study says that before the improvement work was carried out the property was in EPC band E, produced 7,666kg pa of carbon, cost £1,770 pa in energy bills and left the household in fuel poverty. It estimates the cost of the damp/mould to the NHS at £730 pa, and the cost of damp to the NHS and society at £9,500 pa or £197,000 over 30 years. It estimates the value of the property at £81,500.
After improvement: The study says that after the improvement work the property now has no HHSRS hazards. Its EPC band is now C, it produces 3,598kg pa of carbon, costs £895 pa in energy bills and the household is no longer in fuel poverty. It estimates the cost of the damp/mould to the NHS and society at zero this year and zero over 30 years. It estimates that the value of the property has increased to £94,100.
In summary: In this worked example, the NHS and society will save over £9,500 annually now and £197,000 over 30 years. The tenant will save £875 pa in fuel costs plus benefit from a healthier, more comfortable home. The landlord has spent £18,000 but recouped £12,600 of this by way of an increase in the value of their property.
What this research might achieve
In carrying out the research the BRE says its aim has been to create a model that can be used to assess the costs and benefits of taking action on different hazards.
BRE says this model could potentially be used to:
Make the case for investments in housing stock by central or local government, landlords, developers or owner occupiers by showing how cost effective it can be.
Plan and target improvement resources on the most urgent situations and the most vulnerable households.
Plan capital programmes and apply economies of scale to areas of sub-standard housing.
BRE acknowledge, however, that it is likely to be impossible to identify and undertake all the work required to make England’s housing stock healthy and safe immediately.
BRE say that they hope the report will ‘stimulate debate and further studies into the impact of poor housing and make the case for economic investment to mitigate it.’ They hope their model can be applied to real-life situations to accelerate housing improvements for different types of vulnerable people in different tenures of property.
Some final thoughts
The drawbacks of poor quality housing versus the benefits of improving it have long been a difficult problem to tackle in housing, and especially in the PRS. The UK has a large inventory of older housing stock which is inherently more likely to be defective and in lower EPC bands. Additionally, PRS property is not infrequently older property.
On an individual property-by-property basis the costs of poor housing may appear small. Many of these costs, such as the impact on health, are hard to quantify anyway. Worse still, property improvements generally have a high upfront cost. So investment in improvements is usually hard to justify financially.
However, by examining the subject on a long term, holistic basis the BRE report suggests that the reverse is actually true: The costs of not acting are actually very high, the costs of improvements are relatively low, and the potential benefits are considerable. Extrapolating individual property costs out to provide impactful national ‘headline figures’ adds further weight to this argument.
At the end of the day it seems unlikely that this research in itself will persuade landlords and property owners to push on with improvements at any greater rate than currently. However, it should guide further debate on the costs and benefits of doing so.
The Cost of Ignoring Poor Housing has been prepared by Helen Garrett, Molly Mackay, Susie Margoles and Simon Nicol and is published by BRE. The full report can be accessed here.
