Future Homes Standard: can current regulation deliver meaningful carbon savings in new housing?

As developers prepare for the introduction of the Future Homes Standard, questions remain over how it will affect both carbon reduction goals and housing delivery. James Fiske explores whether current regulation can deliver meaningful emissions savings while supporting the large-scale delivery of new homes.

The Future Homes Standard (FHS) represents a significant step in reducing operational carbon emissions from new housing. However, its success will depend on a number of factors, including whether enough homes are built for the policy to have a meaningful impact, and whether the standard alone goes far enough to support longer-term decarbonisation objectives.

These questions come at a challenging time for the housing sector. Rising construction costs, uneven market demand and wider economic uncertainty, continue to affect development viability and housing delivery.

The immediate challenge is not simply building lower-carbon homes but building homes at all.

It could be argued that lower levels of housebuilding would reduce emissions associated with new development. However, this clearly overlooks the wider role housing plays in supporting economic growth. A growing economy is better placed to support investment in the infrastructure, technologies and projects required to achieve longer-term decarbonisation objectives. The challenge is therefore not to choose between housing delivery and carbon reduction, but to make progress on both.

While an important milestone in supporting this vision, compliance with the FHS is expected to increase upfront development costs. This adds to existing pressures on developers who are already grappling with what the Home Builders Federation (HBF)⁽¹⁾ has described as a ‘viability crunch’.

According to HBF analysis, a combination of tax changes, rising materials and labour costs and an expanding range of policy and regulatory requirements has increased the cost of delivering new housing. Further pressures, including the Building Safety Levy and additional amendments to Building Regulations currently under consultation, may add to those costs.

At the same time, proposed changes to steel import tariffs are expected to tighten supply and compound cost pressures. Developers have reportedly warned that higher structural steel costs are already adding around £4,000⁽²⁾ to the cost of building a typical home.

While each FHS-compliant home contributes to reducing operational emissions, the broader carbon benefits of the policy may be more limited if housing delivery remains constrained.

There is some time for economic and market conditions to improve. Transitional arrangements mean the updated housing regulations don’t come into force until March 2027. However, there is no certainty that the factors affecting development viability, investment decisions and the pace at which new schemes are brought forward will ease significantly before then.

The second challenge is whether the FHS alone is sufficient to drive longer-term emissions savings in new housing.

There is very little to criticise about the standard itself as something that materially strengthens requirements for operational carbon performance in new homes. It mandates higher fabric efficiency standards, low-carbon heating and on-site renewable energy generation, supported by tighter compliance modelling through the Home Energy Model (HEM), the government’s proposed methodology for assessing the energy performance of dwellings.

This aligns with the broader direction of UK climate policy. In its recent review of the Seventh Carbon Budget, the Environmental Audit Committee (EAC)⁽³⁾ noted that much of the UK’s earlier emissions reduction came from the decarbonisation of the power sector, particularly the decline of coal generation. Future reductions are expected to depend increasingly on changes across the wider economy, including how homes are heated, how people travel and how industry operates.

However, the committee also highlighted several barriers to decarbonising buildings, including infrastructure readiness, policy certainty, affordability and delivery capacity within the heat market. Current heat pump installation rates reportedly remain below the level required to support longer-term targets.

The EAC further argued that technology deployment alone is unlikely to be sufficient. Its report points to a number of measures to support the decarbonisation of homes more widely, including improved EPC standards and the future development of whole life carbon requirements.

In June, the government’s response⁽⁴⁾ to EAC’s report stated that it would propose to Parliament that the Seventh Carbon Budget be set in line with the Climate Change Committee’s recommended level of 535 MtCO₂e. This would be equivalent to an 87% reduction in emissions by 2040 compared with 1990 levels.

This remains ambitious, possibly unachievable, if a more holistic approach to managing emissions from new and existing building stock isn’t adopted. This is not a critique of the FHS, which was never intended to address every source of building-related emissions. Rather, it highlights the next stage of policy development.

Operational carbon standards are the main part of the framework, but they need to be complemented by broader approaches to measuring and managing whole life carbon impacts. In housing, this will need to be considered alongside measures that support development viability and enable the large-scale delivery of new homes.

Without further progress in these areas, a significant proportion of housing-related emissions may remain outside the scope of effective measurement and policy intervention.

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^{(1) HBF – The Viability Crunch – here}

^{(2) Financial Times – Steel tariffs will delay housebuilding, warns UK construction industry – here}

^{(3) Environmental Audit Committee – The Seventh Carbon Budget – here}

^{(4) Environmental Audit Committee – The Seventh Carbon Budget:
Government Response – here}