International Housing Conference, Singapore

Keynote speech

Sustainable Housing – The EU and the Finnish Perspective

Minister Mentor Mr. Lee Kuan Yew,
Minister for National Development Mr. Mah Bow Tan,
My dear colleague from Spain, Mrs. Beatriz Corredor,
Ladies and gentlemen,

As the Housing & Development Board celebrates its 50th anniversary, I would like to begin my speech by drawing attention to HDB’s important position, not only with respect to improving living conditions, but also its key role in Singapore’s broader economic and social development.

Besides globalization in general, urbanisation and curbing climate change seem to be the two global megatrends that will have the greatest impact on our future. Both will also play an extremely important role in housing and urban development.

Especially in Asia, the urbanisation process is moving forward at an unparalleled rate. In China alone, about 500 million people are expected to move to cities by 2050. In practical terms, this means that one million Chinese will be relocating to cities each and every month for the next 40 years. According to many projections, the rate of urbanisation could be even more rapid. The outcome of this process is that existing urban areas will continue to expand and spread out, while completely new cities will be built from the ground up. Naturally, demand for new housing will be immense in the future.

At the same time, the pressure to combat climate change will continue to grow in the coming years. Because building stock is the main consumer of energy globally, accounting for approximately 40% of total global energy consumption, and because the greatest potential for energy savings and emission reductions lies in this sector, the world is increasingly looking to buildings, especially residential housing, to make a difference. It has become quite clear that there is no government – be it in an industrialized or a developing country – that can leave buildings out of its policy toolbox, if it wants to save energy and reach serious emission reduction targets. And matters are not made easier by the dramatic increase in the need for more housing and other building stock resulting from population growth and improved wellbeing.

The ageing of the population, which is having its own profound effect on housing, is the third megatrend of our age. So far, this phenomenon is mainly affecting Europe and, for example, Japan. However, in the slightly longer run, the entire world will feel its influence.

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The concept of sustainable development includes three dimensions – economic, ecological and social. Each of these also applies to sustainable housing. Housing policy is multidimensional by nature. A good and sustainable housing policy includes matters such as social inclusion, preventing segregation, regional balance, and mobility of labour. Such a housing policy has a positive effect on economic growth and helps to combat climate change, for instance, through energy efficiency and the use of renewable energy sources, not to forget indoor climate. Housing polices play a significant role in providing sufficient decent and affordable housing for people working in key sectors in society such as nurses, firemen, teachers, service sector workers and others. Housing solutions also have a perhaps less tangible, but nevertheless profound impact in terms of communality and fostering family connections. In particular, the many European cities in which every other dwelling is under single occupancy would have much to learn from Asian culture.

Although the driving force behind urban development is the desire to improve living standards, uncontrolled urbanisation also poses problems. If cities are poorly planned, the result is increased social segregation, which gives rise to slums and drug problems, and these, in turn, lead to increased crime and feelings of insecurity, and eventually higher social costs. Then, there is the problem of urban sprawl, which leads to more traffic. More traffic causes traffic jams and accidents, as well as higher levels of emissions. Further, urban sprawl leads to significant losses in productivity, as people waste precious time inside vehicles. In the future, taking account of the built environment as a whole, in which buildings and their use, traffic systems and utility networks have a mutual impact, will be of mounting importance.

It’s important to keep in mind that combating climate change – if understood correctly – does not generate problems, but rather creates new opportunities. Many of the necessary and profound changes needed to fight climate change also make economic sense. In particular, greater energy efficiency always results in a lower energy bill for the owner or user of the building. Increasing the energy efficiency of the built environment would therefore be a smart move, even if our climate wasn’t changing. The inevitable long-term rise in energy prices will also improve the profitability of our initial investment in combating climate change.

Nevertheless, we need to remember that higher energy costs are driving up housing costs, which, in the case of low-income households, has led to talk about “fuel poverty”. If energy bills could be reduced by improving energy efficiency cost-effectively, these actions would also meet the criteria for social sustainability. In fact, there are numerous examples of how we can implement the three dimensions of sustainability simultaneously.

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Next, I will focus on the core impacts of climate change on the building stock, while not overlooking the other dimensions of sustainability.

The European Union, as we know, has acted unilaterally prior to international agreement on reducing greenhouse gas emissions. The EU’s key 2007 decision on climate change is divided into three 20–20–20 targets:

1) Cutting greenhouse gas emissions to at least 20% below 1990 levels by 2020.
2) Increasing the use of renewables such as wind, solar and biomass to 20% of total energy production (currently ± 8.5%).
3) Cutting energy consumption by 20% of projected 2020 levels, by improving energy efficiency.

Until now, many have believed that economic growth depends on uninterrupted energy use, with respective growth in greenhouse gas emissions. The European Union has shown that this doesn’t have to happen. Effective policies can both promote economic growth and reduce energy consumption. In fact, more and more people are saying that ”you will have no business if you do not have a green business”, meaning that environmental aspects have become a necessary part of all businesses.

In Europe, Sweden is one of the forerunners in energy efficiency. The BBC has chosen the Swedish municipality of Växjö as Europe’s greenest city. Sweden has reduced greenhouse gas emissions, while enjoying positive economic growth. In Växjö, economic growth has been even more vibrant than in the rest of Sweden, on average. At the same time, the municipality has, nevertheless, clearly reduced its average emissions more than other Swedish municipalities.

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Buildings, and the related need for heating, cooling and warm water production, consume more energy than any other sector globally. The building stock accounts for approximately 40% of total global energy consumption. Traffic and industry come second, each accounting for less than 30%. According to the IPCC’s estimate, the greatest and most cost-effective potential for reducing emissions lies with the building stock.

The European Union’s response to this challenge is best summed up in a soon-to-be-finalised directive. This new directive sets clear objectives for the construction sector. According to the directive, the European Union ’member states shall ensure that by 31 December 2020, all new buildings are nearly zero energy buildings’ and energy must be derived ’to a very significant extent’ from renewable sources.

The directive includes the term ”nearly” because this will help secure the flexibility needed for cost-optimal implementation.

It is important to increase dramatically the energy efficiency in new construction. On the other hand, it is even more important to decrease the energy consumption of the existing building stock.

To a great extent, the debate on energy efficiency has focused on new buildings partly because progress there is reasonably easy and cost-efficient. However, the real challenge facing many countries lies in renovating their existing building stock. This is also recognised in the EU’s energy efficiency directive which, among other things, requires Member States to issue binding regulations requiring the improvement of energy efficiency during major renovation work. Since renovation is more labour intensive than new building, this issue also has a major economic and social dimension.

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Alongside a change in the “climate of opinion”, we are also witnessing dramatic breakthroughs in technology. This trend can be compared to ongoing developments in the car industry.

The 2010 North American International Auto Show, which just ended in Detroit, gave a clear demonstration of how the whole car industry will change. Fuel consumption is rapidly decreasing and, even more importantly, hybrid and electric cars are entering the market aggressively. Similar technological change is happening in the construction sector. It is not as visible as in the car industry, but it is as radical.

Changing direction in car manufacturing is quite easy, because the number of manufacturers is limited, even on a worldwide scale. Things are different within the building sector. Here, thousands of firms operate on the market with varying levels of expertise, even in relatively small countries. Changing the way of thinking in this sector, and the products offered by manufacturers, is not easy, not to mention the viewpoints of municipalities who are important decision-makers as concerns local infrastructure. But it will happen.

To be a forerunner in the building technology field, the European Union has introduced extensive research programmes to speed up development towards energy-efficient buildings. My country, Finland, also wants to be at the forefront in these developments and we have already witnessed a radical change in the building technology field. What is more, the technology is commercially viable.

Irrespective of its cold climate, Finland is already building homes without conventional heating solutions, which reduces energy consumption to a fraction of what it is for normal buildings.

Improving energy efficiency always reduces energy consumption. However, with respect to emissions, the issue of how the required energy is produced is also of fundamental importance. The promotion of renewable energy sources has a key position in this respect. In addition, using renewable sources to reduce dependency on imported energy would have a major effect on the economy and in terms of promoting security of supply. On the whole, renewable energy use is also increasing in Europe’s construction sector, and new technologies are developing rapidly.

Another step is to improve heat insulation in buildings; this plays a major role in enhancing energy efficiency. In Finland, for example, quadruple glazing is already being employed. Moreover, clear improvements in building insulation can also be justified in warm countries, as these improvements reduce the energy consumed for air-conditioning. This step should be seriously considered because more energy is used globally for cooling than for heating buildings.

Because the impact on production costs is limited and savings in the energy bills of households are high, energy efficiency will also support the government’s housing policy goal of enhancing affordability in the housing sector, even if the price level of energy increases. In the European Union, besides the climate policy targets, its Energy-efficient Building Initiative is aimed at creating new jobs and, simultaneously, promoting economic growth.

Energy production is also changing. When electricity production is based on condensing power generation, the performance efficiency is only around 40%, and in many cases, even lower. Many European Union countries, as well as China, have consistently favoured cogeneration. The basic idea underlying this technology is the exploitation of cooling water. The cooling water becomes heated in the production process and the heat energy is used not only to heat buildings and water, but also as a source of cooling energy. This concept is called ”district cooling”.

Even in my home city of Helsinki, which is hardly known for its scorching heat, is connecting the city centre to a cogeneration-based district cooling network. This has already helped offices, commercial properties and hotels in downtown Helsinki to reduce cooling costs.

At the same time, we should study whether waste processing could be modified to allow for the use of flammable waste as a fuel source, while also producing biofuels such as biogas and biodiesel from biological waste. One such example is the biodiesel refinery being built by the Finnish company Neste in Singapore. This refinery will eventually use 100,000 kg of slaughterhouse waste as part of the process to produce biodiesel.

Changes in building technology and energy production alone will not suffice in achieving the required emission reduction targets. In fact, the more energy efficient we make buildings, the more important are the questions of how and where we live and work. Besides buildings themselves, their users will occupy a key role in the future. Here too, technological development holds out the prospect of new possibilities. To mention one example, a couple of weeks ago I saw a tenement block in which each apartment had a meter on the wall giving a real-time account of electricity and cold and hot water consumption, and the monetary value of each.

Climate change mitigation has to be supported by a substantial mix of policy measures. One way of categorising the tools involved is to view them as demand-driven or supply-driven, that is, aimed either at the consumer or the producer. As consumers’ awareness grows, they will be able to make more educated choices. As a result, producers will have to react to consumer demand. The market can also be a good driver for innovative companies seeking to become forerunners in their field. At the same time, the public sector can push development, through regulatory policies and various financial and taxation tools. The policy toolbox must include all kinds of instruments.

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I would now like to draw your attention to the urban structure.

Land use and transport solutions are crucial to climate change mitigation. Every effort to improve the energy efficiency of the built environment must confront the challenges of urban sprawl and mobility. Creating a transportation network that favours public transportation, walking and cycling is essential in all cases.

Brownfield areas offer countless possibilities to cities to renew urban structure without expanding the city outwards. As industrial areas, railway yards, harbours, docks and goods terminals relocate outside city centres, these areas can be redeveloped into residential and workplace areas based on the principles of sustainable urban development.

The basic question concerning urban structures is quite simple. The more spread out an area is, the longer the average distances are. This leads to a greater need to commute and more traffic. What is important is not only how buildings are constructed, but also how they are located relative to each other.

Well-planned and connected urban structures promote the availability of services and reduce our dependency on cars, and also support social goals. Furthermore, it makes economic sense to reduce society’s infrastructure costs and link together service networks.

As an avid jogger, I have calculated that if my trip to work could be cut by 15 minutes, thanks to integrated, well-planned regional development, and if I could spend this time jogging, I would consume about 3 million “health-promoting” calories during my 40-year-long professional career. I would also reduce the thousands of hours I spend in traffic and minimise my risk of being involved in a traffic accident.

Sustainable urban development, however, is not just about saving energy and smart city planning. To be in tune with sustainable development, buildings also need to be adaptable if the conditions or needs of their users change. From this perspective, an important starting point for urban planners and architects is to make buildings adaptable and capable of serving an ageing population. The construction process must also ensure that the maintenance and repair of buildings is easy and cost-effective.

I would like to stress that a well-functioning urban environment and reasonably priced housing are important prerequisites for the welfare and competitiveness of society as a whole.

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One of the most advanced applications of sustainable housing and urban development is the EcoCity concept. Some of the targets are:
• maximum self-sufficiency in energy production utilizing renewable energy sources, for instance, in buildings and transport;
• waste recycling;
• security of water supply;
• moderate housing and living costs by promoting energy-efficiency and cost-effective construction technologies;
• a clean and green environment.

The EcoCity concept also aims to keep housing and living costs down to a moderate level by promoting cost-effective practices for construction and building use.

Singapore has played an active role in EcoCity projects. Here, I would like to mention the many Singaporean firms that have pursued joint projects in China. China, today, is by far the most active worldwide in construction projects. Finland has also been involved in numerous joint projects in China. It is recognised that Finland is an expert in information and communication technologies which are being actively integrated into housing technologies and construction engineering.

As a viable alternative, Singapore and Finland could pool their strengths in joint projects in China.

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Buildings and the built environment as a whole have exceptionally long-term effects. We do not build houses, commercial properties or transportation networks according to what will be fashionable next spring, but rather for future generations. Thus, any decision taken today on how buildings and cities are built will have a very long-term impact.

Energy-efficient buildings are not only energy efficient, but, first and foremost, smart buildings. Likewise, sustainable housing is not just sustainable, but, above all, smart housing. The faster we change this trend to our advantage, the more we can expect to gain. The more we waver, the more irrevocable damage we will cause.

Population growth, better living standards and urbanisation are fuelling demand for construction services. In fact, the construction sector is already one of the world’s largest sectors and major employer. The need to renovate the existing building stock will further strengthen this trend.

If you also include the growing need to build more climate-friendly buildings, green construction is becoming one of the most important and fastest growing business opportunities in the world.

The profitability of “climate investment” in particular continues to be evaluated based on a rather static understanding of current challenges. The world is changing all the time, however. It is obvious that, as energy prices continue to rise, and new technologies are introduced and enter mass production, improved energy efficiency and the widespread introduction of renewable energy sources will be increasingly profitable.

The world is already full of good and innovative solutions. Nevertheless, the general pace of development has been slow. Even relatively modest achievements have attained global recognition. At the moment, there are only a handful of genuine forerunners, despite a desperate need for them, whether in private companies, cities and even countries.

It is highly unlikely that the pace of change in technologies and lifestyles will get any slower. Our lives and lifestyles are very different from what they were half a century ago. During the next 50 years, the changes will be even more dramatic. It is therefore highly important that everything we build now will allow for future, and economically viable, adjustments.

I am convinced that Singapore will continue to play a major role as a technology forerunner at home and in other countries, and especially in this geographically significant region, which not only includes some of the world’s largest countries, but which is also taking the lead in global construction.

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In conclusion, I would like to stress a few essential points.

Sustainable housing has to take economic, environmental and social aspects into account. Each dimension is necessary: the equation is only as strong as its weakest link.

Sustainable housing will help save our extraordinary planet, reduce poverty and social problems, enhance the stability of society, and create the foundation for favourable economic development.

Besides the provision of water and energy, there is hardly any other human need that is more crucial than the need for decent housing. The goal of a good housing policy is to provide decent housing for all.

What is at stake is not only housing, but also entire environments that need to be sustainable and well designed.

A sustainably built environment is a major competitive advantage for cities and countries, and this will be increasingly important in the coming years.

At the same time, it is perhaps the most interesting, attractive and, essentially, the fastest growing business.

Sustainable housing is smart housing. Smart housing means a smart society. And being a smart society is just smart.