The Welsh Sprinkler Conundrum

In 2012, the Welsh Assembly passed an amendment to their building regulations requiring all new homes in Wales to be fitted with sprinklers, thereby becoming the first territory in the UK to have such a requirement. This has always been seen as a controversial move because sprinkler systems are expensive, costing anything up to £3,000 per pop, and those trying to build homes cheaply resent this sort of intrusion into their business.

A year on and there is evidence that housing starts in Wales are dramatically down (32%) whereas in England they are up (34%). Now as the sprinkler requirement has yet to take effect, it seems unlikely to be the cause of this downturn, but this hasn't stopped the pro-business lobby making a big fanfare out of it.

The more you dig down into this story, the more interesting it gets. In fact, it's a good example of the wider sustainability debate going on throughout the construction industry and the related energy supply business. Just where should the standard be set? How much is it worth spending to save lives? Or atmospheric stability? Or whatever goal you want to achieve? Put another way, how much should we be interfering with the market?

As if to address this question, DCLG in London commissioned a report from BRE Global, which concluded that the sprinkler policy in Wales would cost £6.7 million per life saved over the next decade. The report suggested the policy will save 36 lives and prevent around 800 injuries between 2013 and 2022. BRE Global concluded that this was not cost-effective.

It's the horrible sort of calculation we'd rather not think about but I guess they have a point. If you simply set out to save lives, you could probably find far better ways of spending the money. And in general new homes are far safer than existing ones, many of which have only a passing acquaintance with Part B of the building regs. So by what logic should this ruling only be applied to the safest sector of the housing market?

But there is also a significant counter argument. The cost of homebuilding clearly impacts on the cost of building land. QED, if sprinklers add £3,000 to the cost of a new house, and sprinklers are made mandatory, then the price of the plot on which the house will sit should, in theory, decline by £3,000 to reflect the difference. In effect, it's the land seller who bears the final cost of this, not the housebuilder, nor the house purchaser.

The same arguments apply to almost all building standards. Whenever you introduce a regulation or a standard which the market would not normally meet, then you add a cost burden. If you are of a free-market libertarian persuasion, you can and will jump up and down and shout "Foul" and "Anti-Competitive", or some such, adding that they don't do this in China or, in this case, Shropshire. But our housing market is unusual in this respect because it contains a highly elastic cost component, the land. Whilst the final price of a new home is largely out of the control of the builders — it is usually set by the second-hand market which is ten times the size in terms of turnover — and the cost they pay to build a house is partly out of their control (planners and building regs), the price they pay for the land is very much in their control. Therefore it is generally no hardship for the builders if the government chooses to set high building standards.

It follows that the landowners are the disadvantaged group in all this and it is they who should be leading the campaign against Welsh sprinklers, not the DCLG or the housebuilders. But let's not forget that it is the government who decides which parcels of land can be built on and which can't. So landowners tend to keep their traps shut over matters like this, grateful as they are for the gift of building permits from the government which they are able to sell on for a fat profit.

Follow this line of argument to its conclusion and there really shouldn't be any reason for the government not to introduce loads more regulatory hurdles onto our housebuilding industry. Squeeze it right down to the level where the building land is worth little more than undesignated farmland. Let's have space standards. Let's have Passivhaus. Let's have SUDS and water saving and bike racks and bin stores and whatever else we think would be good. And let the farmers pay.