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HIPS are happening Speech by 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, 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 Page 108 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.

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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.

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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. Page 111

Yet when introduced alongside e-, 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 Page 112 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.