Atelier’s Head of Development Monitoring, Rebecca Nutt, details how the grassroots of the green revolution have created a blossoming of sustainable housing developments…
As ironies go, it’s hard to beat. Green construction may be responsible for more hot air than any other topic in our industry.
But what was once dismissed as a virtue-signalling PR exercise by hard-nosed residential developers has rapidly placed itself centre stage – both in terms of what purchasers and planners want, and even what funders choose to finance.
Like most revolutions, construction’s Green Revolution started from the ground up.
Changing demand from homebuyers has been key. Millennials are the demographic most likely to be first-time buyers, and they’re also the most environmentally aware.
For them, high energy-efficiency and sustainability aren’t merely a bonus for a property they like – they’re essentials. Proximity to cycle routes is increasingly seen on a par with proximity to good public transport.
Consumers across the board are more likely than ever to factor environmental impact into their big-ticket purchases. As sales of Electric Vehicles surge to record levels, so demand is rising for homes with EV charging points fitted as standard.
“As ironies go, it’s hard to beat – green construction may be responsible for more hot air than any other topic in our industry”
Local authorities are channelling the momentum, too. Numerous councils now encourage developers to be environmentally and socially responsible by favouring schemes that emphasise sustainability.
Councils also attach conditions to planning permission, such as employment targets for the construction phase and wildlife protection measures, to ensure schemes both protect and contribute to the local area.
Mortgage lenders have also weighed in, with several high-street names including Nationwide and Barclays offering ‘green’ mortgages with preferential rates on new-build, environmentally friendly homes.
But while all these ‘pull’ factors have had an impact, the primary reason for the shift is the ‘push’ side of the equation: the nexus of developers and their funders.
For many developers, green homes aren’t just better for the environment. They’re better business too. Countless studies have shown companies that embrace ESG – the Environmental, Social and Corporate governance umbrella under which green construction sits – achieve better returns.
That success, together with the desire to lead by example, is leading to lenders like Atelier to consider the ESG impact of proposed schemes.
This is no box-ticking exercise. Our analysis is open-minded but robust, and the results are of increasing importance when considering whether or not to agree to a loan facility.
As a business, we are particularly keen to lend on schemes built on brownfield or contaminated sites, which can be cleaned and repurposed to provide a beneficial use – typically housing priced at an acceptable level for the local area.
While the developers we work with tend to be smaller, more agile players, the combined influence of market demand, planning authority conditions, and lenders’ principles is huge.
No wonder the big beasts of the residential sector are ramping up their sustainability credentials. Berkeley Group claiming the title of the first ‘carbon positive’ housebuilder and Barratt Homes’s commitment to recycling 95% of site waste and sourcing all materials responsibly are just two of many examples.
With agenda-setting players taking such a strong pro-green stance, the culture is now filtering down to smaller housebuilders and completing the virtuous circle.
Just as the new generation of millennial homebuyers demand their homes meet the highest green standards, so too do they choose ethical investments. Meanwhile asset managers, funders, and developers are finding that ethical investments and environmentally sensitive schemes deliver better returns.
It’s the circular nature of the market’s shift to sustainability that makes it so, well, sustainable – and will ensure the green revolution continues even after the industry finds its post-COVID equilibrium.
Main image: Rebecca Nutt MRICS, Head of Development Monitoring, Atelier Capital Partners
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