2.1 Introduction

In Chap. 1, we explored the climate emergency and the role the housing sector plays as a significant contributor to greenhouse gas emissions and other environmental impacts (e.g., material consumption). We also talked about the importance of sustainable housing for environmental, social, and financial benefits it can provide. The evidence is clear that sustainability can improve several critical issues facing the housing sector, households, and policy makers. We also presented an overview of the current system of housing provision, discussing that addressing deeper structural issues within this system is important if we are to transition globally to a low carbon future.

In this chapter, we explore current housing provision in more detail and outline how we have arrived at the current way of ‘doing’ housing, including the governing, financing, planning, designing, building, and habitation of housing. We start the chapter by discussing the market failures of housing and neo-classical market approaches that are not suitable for providing the type of sustainable housing required for achieving a low carbon future (Sect. 2.2). To address this, the use of policy by various levels of government has been a critical driver of housing design, quality, and performance. However, many sustainability advocates argue that these policies have been slow to improve and do not go far enough, given the current climate emergency and other housing issues seen around the world. We discuss some of these key policy mechanisms, including setting and improving minimum performance requirements in building codes (Sect. 2.3), using planning systems to require additional sustainability standards (Sect. 2.4), and developing financial and other alternative mechanisms (Sect. 2.5). This sets the context for later chapters where we explore the range of challenges facing the housing sector and discuss current best practice in sustainable housing and policy.

2.2 The Market Failure of Sustainable Housing

Globally, the housing construction industry largely operates under a neo-classical economics framework—a framework which has guided societies and industries around the world for many decades [1,2,3,4]. Neo-classical economics theory states that competition in the market benefits both consumers and industry which ensures efficiencies between supply, demand, scarcity, and cost [5,6,7]. Thereby, this competition reduces the requirement for government intervention as industry and consumers will determine what the best outcomes are including what products, materials, and services are valued and desired. This idea of ‘competition’ and the need to innovate to find cost efficiencies has reinforced the narrative the housing construction industry uses to advocate for fewer (and certainly not more) regulations.

Opponents of regulations that set requirements for quality and sustainability (among other outcomes) claim that these regulations create ‘red tape’ which adds time and cost to developments which are passed onto consumers and create further financial challenges in an already unaffordable housing market [8,9,10,11]. It is also argued that regulation does not only impact the bottom end of the housing market, but also stifles the ability of companies to innovate when the innovation does not conform to regulations. Therefore, in these arguments, consumers miss out on two fronts: it adds costs but also constrains what the industry can delivery.

Instead, opponents of regulation suggest that consumers will use the competition of the free market to decide what types of housing they want built, where they want it built, and at what quality and sustainability level. This means that if someone wants a large house, they can have a large house as long as they have the money. If they want granite benchtops in their kitchen, they can have them. And if they really want extra insulation, solar panels, double-glazed windows, and passive solar performance, they can have it. But consumers must ask for these things and be able to pay for them.

This thinking is based on three critical assumptions about consumers: (1) that consumers make rational decisions, (2) that consumers make decisions that maximize the outcome for themselves, and (3) that consumers make these decisions independently, based on complete information [2, 12]. These assumptions are contested within the environmental economics and broader social and sustainability literature [13,14,15,16].

We know that consumers often have other motivations distinct from self-interest and profit maximization, which are part of the choice process, or have a range of constraints impacting their decision making. Yet, these realities are not captured in the above assumptions and consumers rarely have complete information when making choices [17,18,19,20,21]. For example, the decision to buy a dwelling is limited to the existing dwellings available for purchase at that point in time or finding land to build a new dwelling (or via knock-down rebuild), which itself is limited to what is available or already owned. This decision is also constrained by budget. Similar constraints apply for renters. In many countries, there is currently an undersupply of housing, making it even more competitive or challenging for those wanting to buy or rent property [22, 23]. All this means that housing consumers face a constrained choice, even before other factors like improved sustainability are considered and therefore the market is not operating as the theory about the free market suggests.

This neo-classical market framework has enabled significant wealth accumulation by key stakeholders in the housing construction industry at the expense of housing quality, affordability, sustainability, and social outcomes (see Chap. 3). It is not just key stakeholders in the housing construction industry who have made significant profits from construction, but also governments. Governments are heavily dependent on construction in many parts of the world. The health of the housing construction industry is intrinsically linked to different levels of government, as it is a key determinant of economic measures like Growth Domestic Product and provides significant income for governments via development fees and property and land taxes. We have seen evidence of this with governments’ responses around the world to the Global Financial Crisis in the late 2000’s and COVID-19 recoveries (from 2020 onwards) where infrastructure and building projects have been key pillars of economic and social recovery. However, this can also be seen as a catch-22, where governments have found themselves wanting to make housing more affordable and accessible to all, but knowing that any decrease in housing value will impact their property income and the broader health of the economy. It is a tightrope that governments have been walking for decades and the loser is often the consumer; we are seeing the price of housing for purchase or rent rapidly increase in many jurisdictions around the world, often faster than the increase in wages and often without any measurable improvement in housing quality, sustainability, or even access to nearby amenities.

As explored in Chap. 1, sustainable housing has a clear range of benefits. In addition to providing more basic safety and security that housing entails, sustainable housing can reduce environmental impacts, reduce living costs, and improve health and well-being [24,25,26]. If we accept the ‘rational’ consumer assumed by the industry and many policy makers, we should expect to see consumers demanding improved sustainability outcomes for new and existing housing. However, around the world, we have seen that consumers are generally not engaging with sustainability beyond what is set in minimum performance standards unless there is significant financial incentive for them to do so (e.g., residential solar rebate programmes, mandatory disclosure of building performance programmes). For example, research of the Nationwide House Energy Rating Scheme in Australia found that from 2016–2018 almost 82% of new detached housing was built to meet only the minimum building code requirement, with only 1.5% built to the economic and environmental optimum (higher) performance [27]. From 2019 to July 2022, this had fallen to 1.4% of new housing [28] despite it corresponding to the period of time where significant public, industry, and policy discussion was occurring about a likely increase to minimum building performance requirements that were announced in August 2022.

Some jurisdictions are delivering a much higher percentage of new dwellings closer to the technical performance outcomes required for a low carbon future. For example, data from the UK found that, while there was only around 1.3% of all new housing built to the Energy Performance Certificate rating A across 2020–2021, most new houses are achieving an Energy Performance Certificate rating B (Fig. 2.1). While this might seem like a good outcome, especially in comparison to Australia, the design, quality, and performance of new housing in the UK is still being criticized for being insufficient to respond to the climate emergency [9]. Additionally, with new dwelling construction only representing a small percentage of the overall stock in the UK, the more significant issue is the poor design, quality, and performance of existing housing which primarily have ratings of D or worse (Fig. 2.2).

Fig. 2.1
A stacked bar graph of energy performance certificate ratings for new housing in the U K from 2012 to 2021, for 6 decreasing efficiency grades, A to G. B tops, followed by C, A, and G, in decreasing order of values.

Energy Performance Certificate ratings for new housing in the UK from 2012–2021. Energy efficiency grades from A (best) to G (worst) [29]

Fig. 2.2
A stacked bar graph of the energy performance certificate ratings for existing housing in the U K from 2012 to 2021, for 6 decreasing efficiency grades, A to G. D tops, followed by E, C, F, B, and G in decreasing order of values.

Energy Performance Certificate ratings for existing housing which undertook an Energy Performance certificate in the UK from 2012–2021. Energy efficiency grades from A (best) to G (worst) [30]

The push by some key housing construction industry stakeholders and policy makers to leave housing quality and performance ‘to the market’ assumes that consumers can access and understand the design, quality, and performance information of dwellings. This has largely been found to not be the case, both in terms of access to such information as well as the understanding of what it means [21, 31].

There are some notable attempts to provide housing customers improved information about the design, quality, and performance of housing to address market information gaps [32]. For example, mandatory disclosure of building performance, which typically requires all houses being sold or rented to have an energy or performance rating, are among some of the longest running housing information programmes. Such programmes include the Energy Performance Certificates across the European Union (EU) and UK and the Civil Law (Sale of Residential Property) Act 2003 in the Australian Capital Territory (Australia) [33, 34]. In some of these jurisdictions, there is now more than 20 years of data and research is increasingly focusing on understanding the influence of the provision of information in these jurisdictions. Largely, the evidence suggests that the provision of easy to understand, verifiable and independent information results in positive outcomes across a range of different metrics for housing consumers such as driving the uptake of energy efficiency retrofit.

Improved information for housing consumers is translating into an improved willingness to pay for sustainability in some jurisdictions. For example, housing consumers across different jurisdictions put a sale or rental premium of up to 15% or more on higher quality and performing dwellings [35,36,37,38,39,40,41,42,43,44]. However, positive sale or rent value is not universally found in the research. For example, in Northern Ireland, researchers found that dwellings with higher Energy Performance Certificates were not more likely to increase in sales price [45]. In Chile, consumers associated higher ratings with higher prices which resulted in an unwillingness to pay for improved outcomes [46].

Beyond the impact on sale or rent price, improved information about dwelling quality and performance has been found to enhance opportunities for consumers to undertake retrofit activities or seek out higher performing dwellings which would reduce their cost of living and improve other outcomes such as thermal comfort [47,48,49,50]. For example, Sweden is one jurisdiction with an early introduction of the EU Energy Performance Certificate requirement where owners of multifamily dwellings were required to obtain a certificate before the end of 2008. With the certificates lasting ten years, there has been a significant number of dwellings in Sweden that have had a second rating completed. Von Platten et al. [51] analysed the first and second round certifications and found that energy performance in existing housing had improved and that improvement was greater in rental (private and social) rather than owner-occupied dwellings. In a study surveying homeowners across 12 EU countries, Charalambides et al. [50] found Energy Performance Certificates played a role in renovation decisions as well as rent/buy decisions, but the results of the influence varied significantly across jurisdictions. The authors found that, for those who had already renovated their homes, 59% said the information played a very important role in undertaking the renovation and 20% said the information was somewhat important. Across the emerging body of research there seems to be a positive association with improving housing quality and performance and understanding the value of this.

There has also been research exploring the role language and key intermediaries, such as real estate agents and builders, play in educating consumers [52, 53]. Hurst [19] explored how the language used by real estate agents advertising houses for sale in Melbourne (Australia) engaged, or did not engage, with sustainability. Analysing more than 150,000 advertisements from 2008–2015, Hurst found that only around one in five houses had some mention of sustainability. While this percentage slightly increased across the analysis period (up to one in four), Hurst was critical of the way sustainability terms were being used. Often, sustainability was used to elicit a feeling of ‘home’ rather than have more meaningful discussions. For example, 81% of the advertisements contained no key words about energy efficiency and another 15% only contained one key word. Hurst [19] also found that, where sustainability was discussed, it was often placed in the middle of the text, while consumers are more likely to remember the first and last parts they read. He argues that the lack of emphasis placed on energy efficient characteristics ‘has the potential to dilute the importance of reducing energy consumption in housing and retard market acceptance’. (p 196).

It is not only real estate agents who have a critical role to play in disseminating sustainability information; the practices of the housing construction industry itself are just as critical [54]. Warren-Myers et al. [21] analysed the 30 largest builders of detached homes operating in Australia to see how they communicated on their websites about housing energy efficiency and performance. Only two thirds of builders mentioned energy rating requirements, while half stated that the regulated 6 star minimum (0 worst–10 best) was part of their individual standard despite it being legally required. Furthermore, the researchers found that, in many cases, the builder’s communicated information about the 6 star minimum in misleading ways. For example, there were multiple examples where websites presented a visual representation of stars, but with only 6 stars rather than 6 out of 10 (the maximum). This was deemed as misleading ‘due to semantic confusion’ and was arguably in breach of Australian consumer laws. In earlier research, it was noted that, ‘the lack of information relating to sustainability provides evidence for why consumers demonstrate little engagement in the sustainability agenda when entering the building process’ [52, p. 35].

This lack of consumer and stakeholder understanding about sustainable housing is not just limited to the dwelling itself, but also broader considerations of how the house is impacted by, and impacts, wider sustainability. For example, research by Ambrose [55] finds that many people do not think about how the energy they use in their home is generated.

While these information programmes and intermediaries have been recognized as playing an important role in trying to improve understanding and engagement with sustainability in housing, there is an ongoing challenge that many consumers are not responding, or are unable to respond, to what improved performance of their housing means for them, society, or the environment. Consumers are responding to what is being provided or what they have known or experienced previously (i.e., social norms). Clearly, there continues to be a market failure occurring in relation to sustainable housing. Research that has asked what consumers look for in housing continues to identify elements such as price, location, number of bedrooms and bathrooms, and the quality of the kitchen above considerations of sustainability [19].

This market failure is not new. To address this issue, governments around the world have been trying different policy levers to improve the quality and performance of housing, including the aforementioned mandatory disclosure schemes. By far, the most common policy approach has been the setting of minimum performance requirements within building codes. There has been a long policy history in some jurisdictions with energy efficiency and performance requirements in an attempt to improve the bottom of the market, while other jurisdictions have only engaged with this approach in more recent years [56]. This is explored in the following section.

2.3 Building Codes

The first building codes emerged in the 1940s and they were slowly introduced in many developed countries over the following decades. They are now a critical mechanism for addressing dwelling quality and performance [56,57,58,59]. Early iterations of building codes for housing were developed to address minimum levels of safety, quality, and performance for both the construction and occupation phases of the dwelling [60, 61].

Building codes are regulatory documents developed by governments, often in conjunction with peak housing construction industry stakeholders. The codes outline what can, and cannot, be done in relation to design, materials, technology, and construction methods. Typically, building codes are either prescriptive or performance-based. Prescriptive regulations involve a detailed requirement for each element (e.g., staples shall be not less than 1.98 mm in diameter), whereas performance-based regulations provide more overall requirements (e.g., residential buildings shall be equipped with heating facilities capable of maintaining an indoor air temperature of 22 °C). In recent years, there has been a shift away from prescriptive codes to allow for flexibility and innovation and to account for complexities within buildings and across different building sites [59, 62].

In locations with mandatory building codes, someone who wants to build a new dwelling, or undertake significant renovation of an existing dwelling, would need to demonstrate compliance with the codes as part of any planning and construction approval process. This is typically demonstrated through a ‘deemed to satisfy’ approach (essentially, a box ticking exercise to ensure key requirements are met and that evidence can be provided to support those requirements) or through computer modelling to demonstrate that overall performance outcomes are met.

Figure 2.3 shows the overall modelling energy loads required for heating and cooling across different cities in Australia. This is set through the Nationwide House Energy Rating Scheme, which is a framework for evaluating the thermal performance of housing on a scale from 0 star (worst natural thermal performance) to 10 stars (best natural thermal performance, requiring virtually no mechanical heating and cooling) and links to the National Construction Code to demonstrate compliance with minimum performance requirements. Since 2010, the minimum performance requirement was to achieve a 6 star standard, which was improved to 7 star from 2023.

Fig. 2.3
A grouped bar graph plots energy loads versus 10 star bands for 8 regions. Star bands 1 to10 in Canberra, Darwin, Hobart, Melbourne, Adelaide, Perth, Sidney, and Brisbane have decreasing order of values.

The Australian Nationwide House Energy Rating Scheme star bands and energy load requirements [63]

The energy shortages of the 1970s were a key turning point for the consideration of energy and sustainability within building codes [56, 64]. Leveraging the wider focus on improving energy consumption and efficiency, building codes started to expand beyond safety elements to include minimum performance requirements for elements such as energy, heating, and cooling (thermal performance), lighting, water, and other sustainability considerations. The use of regulation to improve sustainability in housing was, and still is, seen as a way to start to address broader market failures, ensure consistency, and reduce risks, uncertainties, and confusion over requirements [33, 65,66,67,68].

The inclusion of energy and sustainability elements within building codes (sometimes referred to as building energy codes) are increasing, but are still not universal. The International Energy Agency reported that, in 2020, there were 85 countries with mandatory or voluntary building codes that contained specific energy requirements and another eight countries with codes in development. There were also a number of other jurisdictions (i.e., states or provinces) with building energy certifications (either mandatory or voluntary) [59]. However, globally two in three countries lacked mandatory building codes with specific requirements for energy, with many of these being in developing countries where some of the largest growth in residential buildings is occurring [59]. Where they have been implemented, mandatory building codes with energy and sustainability requirements have been found to be a critical mechanism for reducing energy consumption and greenhouse gas emissions from the housing sector. A range of studies has found that building energy codes have improved energy performance in housing by up to 20% (or more) [59, 69, 70].

The introduction and development of building codes that address minimum performance requirements has happened sporadically and without international coordination. In most cases, each jurisdiction has developed its own requirements and this has resulted in significant variances in what is included, or excluded, from such codes. There have also been periods of more significant development (see examples below), but for the most part any revision of building code minimums has happened through subtle tweaks rather than significant steps forward. These requirements can also be quite challenging to change once set. In some locations like Australia, minimum performance requirements were changed in 2010 and were not significantly revised again until 2023, demonstrating how slow some jurisdictions have been to embrace or improve sustainable housing requirements.

While minimum dwelling design, quality, and performance requirements have been improving in many developed countries over recent decades, they remain short of what is required for a transition to a low carbon future and there are calls for further innovation that better aligns with the housing future we will require [31, 59, 67]. Some have also cautioned against the reliance on building codes as the only answer. For example, Cass and Shove [71, p. 1] argue that codes and standards are increasingly leading to outcomes that are ‘disconnected from changing user needs’. They say that because the term ‘standards’ implies it is a good thing, it creates an industry norm and may result in stifling further innovation beyond the minimums.

There are, however, examples that have emerged over the past two decades which have aimed to go beyond the standard approaches to delivering housing performance.

2.3.1 Mandatory Codes

Collectively, the EU has developed a number of policies related to housing and energy efficiency that guide Member States, including Directive on the Energy Performance of Buildings (2018/844/EU) (initially Directive 2002/91/EC, but updated several times since its introduction) [72]. The latest version of these policies sets regulatory requirements for Member States to ensure that all new buildings from 2021 (including residential) are nearly zero energy. There is also a significant focus on scaling up the delivery of cost-effective deep retrofits to existing buildings [72]. This regulatory approach is seen as a critical for the EU to achieve longer term greenhouse gas emission reduction targets, as well as a range of other outcomes such as improving energy resiliency and security. A review of the Directive’s implementation found that, by the start of 2021, seven jurisdictions had performance requirements that were less energy demanding than the EU benchmarks, and only three jurisdictions had not implemented the requirement (Greece, Hungary, and Bulgaria); Greece and Hungary were noted as introducing the requirements by the end of 2022, while uncertainty over Bulgaria remains [73].

The UK has been an early leader in the space of sustainable housing with the introduction of their Code for Sustainable Homes policy that set out a ten-year pathway to increase minimum sustainability requirements at set periods and to deliver zero carbon new housing by 2016. While the policy was withdrawn in 2015 when there was a change in government, the ten-year plan was seen as an important way to deliver certainty for the housing construction industry and other key stakeholders regarding how a transition to sustainable housing would be delivered [31, 74]. However, the withdrawal of the policy has lasting impacts for households. Since 2016, the removal of the Code for Sustainable Homes requirements resulted in more than £790 million of additional cumulative energy costs paid by owners of almost 1.2 million new homes [75].

In 2019, the UK Government announced a Future Homes and Buildings Standard that would result in new housing reducing emissions by around 80% when implemented by 2025 compared to performance of the 2013 building standards [76, 77]. In preparation for achieving this outcome, a step change improvement of performance of around 30% was introduced in 2022 [77]. In an analysis of sustainable housing policy development in the UK, Kivimaa and Martiskainen [78, p. 93] found that low carbon housing policy development improved the opportunity for transitions intermediaries to engage ‘through increasing needs and resources to pilot, scale-up and implement policy’. The introduction of these new short-medium term policy requirements in recent years is likely to further support opportunities for other stakeholders to innovate and be involved in the transition.

The establishment of short-medium term policy pathways has also been applied in several other jurisdictions to guide a transition to sustainable housing. For example, in 2008, the state of California established a medium-term energy efficiency policy plan to require new housing from 2020 be built to a nearly zero energy standard [79]. Since 2008, the plan has undergone several revisions. At the time of writing, the 2019 California Energy Efficiency Action Plan is the latest version of the plan [80]. The 2019 update seeks to double energy efficiency by 2030, remove and reduce barriers to energy efficiency in low income or disadvantaged communities, and reduce greenhouse gas emissions from the building sector. Specific performance requirements for housing are established within the 2019 Building Energy Efficiency Standards [80] which now include requirements for renewable energy technology and a range of other efficient technologies.

This approach, where a short-medium term policy plan is put forward, is becoming more common: several other jurisdictions have announced plans to transition to low carbon or energy buildings by 2030. This includes an announcement by the Canadian Federal Government in 2022 which stated a goal of net-zero energy ready buildings by 2030 [81]. Some jurisdictions within Canada have already started taking steps towards this outcome. For example, British Columbia enacted the BC Energy Step Code in 2017 to show the Province’s commitment to taking incremental steps to increase energy efficiency requirements for making buildings net-zero ready by 2030. The BC Energy Step Code is a voluntary provincial standard, giving municipalities the option to implement the Energy Code and either require or encourage builders to meet one or more steps as an alternative to the BC Building Code’s prescriptive requirements. The code does not specify the construction of a building, but simply identifies energy efficient targets that must be met in a way that the design and construction team choose.

It is not always about achieving a zero energy or carbon goal. For example, Wales has set out their own requirements to reduce carbon emissions from new housing by 80% by 2025 [82]. The requirements are not only about improved environmental performance and energy efficiency but they are linked with broader social goals like improving occupant health and well-being and ensuring a resilient housing stock in the face of a changing climate. The importance of integrating broader environmental or social goals into housing performance policy has been identified elsewhere as being critical for strengthening housing performance outcomes in the face of a resistant housing construction industry [74].

2.3.2 Voluntary Codes

In addition to regulating minimum performances in building codes, there has been the emergence of voluntary energy rating tools which aim to help drive housing performance forward through systematic and robust frameworks. These voluntary tools have been developed for jurisdictions where regulations do not exist or where they are not sufficient to deliver the types of housing required for a low carbon future.

One prominent example is the Passive House standard, which originated in Germany but is now spreading internationally [83]. Passive House aims to deliver low energy, thermally comfortable, and affordable housing. Achieving a Passive House standard is up to 90% more energy efficient than typical housing [83]. This high performance outcome is achieved through strict requirements for thermal energy loads in the design, materials, technologies, and construction methods applied, as well as through rigorous compliance checking at multiple points throughout the construction process. It is the attention to detail during the build which is a key difference to many other sustainable housing approaches.

Another example is the Living Building Challenge standard which emerged in 2006 and aims to address several criteria including more traditional elements like energy, water, and materials as well as other criteria such as place, health and happiness, equity, and beauty. Unlike other standards, the Living Building Challenge aims to be a regenerative performance, requiring the building to do more than just meet net-zero. For example, the Living Building Challenge requires dwellings to meet 105% of their energy needs through renewable sources. It also goes beyond the technical focus of the building to include how the building adds value to the occupants and surroundings. These voluntary tools have had varying success but are increasing in popularity around the world, especially regarding shifting the focus to improving health and well-being for occupants.

2.4 Planning

The introduction of building codes and the shift from a focus on safety to minimum performance requirements (such as energy efficiency) have resulted in improving housing design, quality, and performance. However, some researchers and policy makers argue that there has been an overreliance on building codes to deliver improved sustainability given the lack of compliance with them, tension they create with the building regime, and the often long lag times to amend to the codes [84, 85]. Over recent decades, this has led to attempts to influence sustainability outcomes in the housing sector through planning systems in different parts of the world, at both the individual block development and larger urban scale.

Planning is concerned with shaping cities, towns, and regions by managing development, infrastructure, and services. Strategic land use planning (also known as physical planning or spatial planning) ‘refers to planning with a spatial, or geographical, component, in which the general objective is to provide for a spatial structure of activities […] which in some way is better than the pattern existing without planning’ [86, p. 3]. Statutory land use planning is also responsible for approving developments as all formal developments need permission from the government [87]. When it comes to the role of planning in housing, strategic planning is responsible for the location of housing; housing type, mix, and diversity; location of transport, jobs, and services; urban growth; and urban consolidation. Strategic planning takes a macro approach and creates area-wide policy plans that map general policy districts such as conservation, rural, or urban areas. It also creates communitywide land use design plans and is responsible for small-area plans such as transportation corridors, business districts, and neighbourhoods. Statutory planning is responsible for land use regulations, zoning, density, residential growth boundaries, and planning approvals and permits. There are several mechanisms employed by governments and urban planning departments to control land use. These include zoning, development controls, design guidelines, and building codes, among others.

Zoning is a system for developing various geographic areas that are restricted to certain uses and development. It is a tool for governments and urban planning departments to guide future developments and to protect areas and people. While the exact terms differ around the world, common zones include industrial, commercial (retail and office), agricultural, residential, mixed use, parks, and schools. Within each category of zones, each city will provide further definitions and restrictions. For example, in the City of Vancouver, housing can occur in several different zoning districts such as multiple dwelling districts, two-family dwelling districts, one-family districts, as well as in other areas such as comprehensive development districts, historic area districts, and light industrial districts. In addition to zoning, other approaches include subdivision regulations, which are used to convert land for greenfield suburban developments; tax and fee systems, including development contributions, which are employed to generate revenues needed to provide certain services or for infrastructure improvements; geographic restraints (growth boundaries) that control growth and limit development in specific geographic areas; and official mapping which provides the public with maps of proposed future facilities and their locations.

Architectural or urban design reviews are another method to control land use and the type and appearance of developments. Some jurisdictions have an urban design panel made of design professionals who advise the local government about development proposals or policies, including major development applications, rezoning applications, and other projects of public interest. Another instrument is design guidelines which are illustrated design rules and requirements that provide either prescriptions or strategies on the physical development of an area. Design guidelines have been successful in delivering a range of benefits, for instance, ‘quality, certainty, coordination, land and property values’ [88, p. 276]. These design guidelines go beyond the performance and design requirements found within building code requirements.

Planning operates within a multi-level governance context. In Canada, planning is a provincial matter but provinces defer their responsibilities to local governments. Provincial governments provide legislation and frameworks for how planning and associated activities must be carried out, as well as the structures for voluntary agreements with local governments. Whereas, in Australia, the state governments retain more control over planning with local governments responsible for implementing policies. In the USA, planning is mostly a local government exercise with literately thousands of different planning systems across the country. These governance contexts are even more complex with the addition of different systems such as building codes. For example, buildings codes fall under provincial/state jurisdiction in Canada and the USA, but national jurisdiction in Australia.

In different jurisdictions, the planning system has been used to intervene at the provincial/state and local level due to the limited ability to improve sustainability through the building code. In the state of Victoria (Australia), a number of local governments have had the Local Planning Policy Clause 22.05 Environmentally Sustainable Design incorporated into their planning scheme with approval from the state government. This clause allows local government to embed sustainability requirements into local planning policies. Most local governments have required planning applications be accompanied by a Built Environment Sustainability Scorecard which was designed to support the Sustainable Design Assessment in the Planning Process.

In British Columbia (Canada), the provincial government launched the B.C. Climate Action Charter in 2007; since then, the majority of local governments have signed on. Under the Charter, signatories commit to becoming carbon neutral in their cooperate operations; measuring and reporting their community’s greenhouse gas emissions; and creating complete, compact, and more energy efficient communities. Local governments and planning departments use their Official Community Plans (strategic planning document) and tools such as Development Permit Areas for Climate Action, which are designated areas for the purposes of supporting climate action through energy or water conservation and greenhouse gas emissions reductions, to ensure that planning decisions lead to more sustainable housing outcomes. Building examples include improved siting of building to capture solar energy, the provision of deep overhangs for shade, and the inclusion of rainwater collection systems or geothermal systems.

What can be seen from these examples is that the planning system in many jurisdictions can play a critical role in the provision of sustainable housing (new and existing), and where building codes fall short, planning requirements can push for improved outcomes. The planning system is especially important for addressing sustainability beyond the individual dwelling level, which is typically not considered within building codes, or by individual dwelling owners. Given the challenge in transitioning to a low carbon future, improvements will need to come at different scales, which will be discussed further in Chap. 3.

2.5 Alternative Mechanisms

Further to the approaches explored above, there are a range of complementary approaches that have emerged in recent decades to address and guide improved housing design, quality, and performance. These approaches typically aim to address consumer barriers around market failures.

For example, there has been a range of attempts around the world to provide consumer education around how to reduce energy and water consumption and improve energy and water efficiency within the housing sector [89]. These education campaigns, which are separate to the earlier discussion on mandatory disclosure of building performance, have provided basic energy and water literacy for how occupants influence and improve housing performance through their everyday lives. There have also been education programmes focused on providing information around key design, material, technology, and construction method considerations that can create a more sustainable home. These programmes recognize that, although housing can be complex, there are common approaches for improving outcomes.

These campaigns have had varying success: some programmes have demonstrated lasting change. Evidence from Melbourne (Australia) found that, during periods of draught, different education campaigns played a critical role in reducing water consumption. The voluntary ‘Target 155 L’ campaign, which was introduced in Melbourne in 2008, used a range of advertising and education to encourage residents to reduce their daily water consumption to under 155 litres per person (40% lower than average consumption of only a few years previous). Analysis found that the campaign was quite successful with consumption not only dropping to the desired level but also remaining at that level for several years following the campaign’s formal end [90]. More than ten years after the campaign started, the average water consumption in Melbourne remains around 160 litres per person [91]. One of the ongoing challenges for education campaigns, as with any changes to practices or lifestyle, is that it can take a long time for people to develop new energy or water efficient practices and, unless the education campaign is sustained or repeated, the benefits can decrease over time.

There has also been a rise in open house style events for sustainable housing, which have both acted as a way educate consumers and demonstrate what is possible [92]. Or, as Martiskainen and Kivimaa [93, p. 28] put it, such events create a ‘space for initial visioning by sharing experience from completed projects’. Seeing real life examples helps translate ideas and knowledge [94], so these open house experiences are important for both learning what has worked and identifying what has not, as well as learning how to improve the overall process.

In conjunction with raising awareness through education campaigns, product labelling programmes, such as Energy Star, have provided consumers with improved information to aid purchasing decisions. The Energy Star programme was developed in the USA in 1992 to address increased energy from appliances, particularly in dwellings, and it is widely regarded as one of the more successful government energy efficiency programmes [95]. Systematic improvements to the programme have seen minimum energy efficiency standards of appliances increase over recent years. Since its inception, the Energy Star programme has helped save more than 5 trillion kWh of electricity and reduced greenhouse gas emissions by 4 billion metric tons [95]. The programme has also seen significant financial savings with more than US$42 billion in 2020 and more than US$500 billion in avoided energy costs since the start of the programme. In addition to Energy Star for product labelling, there has been an Energy Star certification for homes which has seen more than 2.3 million homes certified to its performance level since 1995, resulting in housing that is at least 10% more energy efficient compared to building code requirements [96]. In 2020 alone, this programme (Energy Star) saved 3 billion kWh of electricity, avoided US$390 million in energy costs, and achieved 4 million metric tons of greenhouse gas reductions [96]. Similar benefits have been seen elsewhere; for example, energy efficient appliances are saving New Zealanders more than NZ$30 million a year, with estimated economic savings of NZ$1.5 billion since 2002 [97].

A further approach that has been used with varying success is the use of rebates or tax incentives for energy efficient technologies or building practices. For example, from 2007–2012, the UK offered significant stamp duty (land tax) reductions to encourage consumers to purchase new housing that exceeded minimum performance regulations in a bid to reward early adopters of the higher energy performance standards [98, 99]. This may have helped reduce costs to deliver zero carbon homes in the UK by around 8% across the first four years of the Code for Sustainable Homes programme [100].

In Australia, rebates (including upfront and as a credit for excess energy) have seen the rapid uptake of residential solar photovoltaics (PV) to the point where more than one third of homes now have a solar system—a change that happened in less than a decade. However, there have been challenges with the various financial support programmes, and when the rebates or other financial supports have been too high, the programmes have often seen an over-subscription of uptake which has led to issues around the quality of some systems being installed. The frequent changes to the amounts received for excess energy and the feed-in-tariff has fluctuated over the years and, depending on it if is higher or lower than the cost for consumers to purchase standard energy, it starts to change the way the systems should be used to maximize financial outcomes. For example, if the feed-in-tariff is high, then it benefits households who are out of the home during the day and can sell as much energy as possible; whereas, if the feed-in-tariff is low, it is better for that household to consume as much of the energy they are generating as they can.

Rebates, and other innovative finance options, have been identified as particularly important for the retrofit of existing dwellings. To date, much of the retrofit undertaken across the world has, outside a few key government programmes, largely been driven and funded by individual households. Typically, banks and other significant investors have been reluctant to drive this funding. Some examples of where this is occurring include the Property Assisted Clean Energy finance programmes in the USA and low cost loans delivered by the German KfW state bank [101]. Brown et al. [101] discuss how meeting future climate challenges will require significant alternate funding and easier access to funding for retrofits.

2.6 Conclusion

Sustainable housing offers significant opportunities to improve outcomes across a range of environmental, social, and financial metrics. There is increasing evidence that we can (and should) be delivering much higher design, quality, and performance for new housing and significant deep retrofits for existing housing. However, as we explored in this chapter, there have been significant market failures around sustainable housing. This is important to understand not only because it provides a context for how we have been addressing housing design, quality, and performance (largely through inadequate building codes), but also because it identifies the opportunity for change. We discussed some of these key policy mechanisms, including the setting and improvements of minimum performance requirements in building codes, the use of planning systems to require additional sustainability requirements, and the development of financial and other support. This sets the context for later chapters where we explore the range of challenges facing the housing sector and discuss current best practice in sustainable housing and policy.