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This publication is available at https://www.gov.uk/government/publications/quality-assurance-of-administrative-data-in-the-uk-house-price-index/scottish-energy-performance-certificates
This is the quality assurance of administrative data (QAAD) of the data source in Scottish Energy Performance Certificates used the production of the UK House Price Index (UK HPI).
Scottish Government website
The UK House Price Index (UK HPI) measures the change in the price paid to purchase residential property in the United Kingdom. A number of different administrative datasets are used in the production of the monthly HPI using a technique known as hedonic regression. In simple terms, hedonic regression is a technique which accounts for the changing quality of property transacted each period to isolate only pure price change, so that the change in price is not distorted by differences in the composition of property sold (for example, you cannot directly compare the price of a one bedroom property sold in one period with a three bedroom property sold in another).
The hedonic regression approach requires detailed information on the characteristics of property sold, both regarding the physical attributes of the property (such as size, floor space) and the location of the property (what type of neighbourhood, where in the country for example). For the production of the UK HPI this data is obtained from a variety of administrative data sources that cover the price paid for transacted property (such as the Price Paid Dataset collected by the Land Registry for England and Wales), the attributes of a property (such as the Council Tax Valuation List maintained by the Valuation Office Agency) and characteristics related to the location of the property (such as the type of neighbourhood where the property is situated, defined by the Acorn classification from Consolidated Analysis Centers, Inc.(CACI)).
This document will focus on Scottish Energy Performance Certificates. Scottish Energy Performance Certificates (EPC) are used to provide the number of habitable rooms for Scottish properties required for calculation of the UK HPI. The Energy Performance of Buildings (Scotland) Regulations 2008, came into force towards the end of 2008, meaning that EPCs exist for all residential property transactions that have taken place since January 2009.
2. Summary of process
Transaction data are provided to the Office for the National Statistics (ONS) on the following variables:
- property address
- floor area
- number of rooms
- timestamp (date and time)
Each month, these data are matched to the latest set of property transactions for Scotland (by property address) with the resultant data then used in the production of the latest month’s house price index.
3. Assessment of the Scotland Energy Performance Certificates data using the Administrative Data Quality Assurance Toolkit
The production and publication of house price data can be considered as medium profile, in that there is wider user and media interest in the results that are published, with moderate economic or political sensitivity.
There is good appreciation of the context in which the data are collected and the quality standards applied to the data meet our statistical requirement. As such, the level of risk of quality concern is classified as medium. This means an enhanced level of assurance is required for this data source.
3.1 Practice area 1: operational context and admin data collection
Energy Performance Certificates were introduced to comply with European legislation which requires that an EPC be provided on construction, sale or rental of a building to a new tenant. EPCs are produced by members of Approved Organisations (AO) who have been appointed by Scottish Ministers to deliver certification services. As part of their appointment each AO must operate within the terms of the operating framework, which sets out how the organisation must work in terms of Code of Conduct and quality assurance.
EPC fall into two categories, dwellings and non domestic buildings. EPCs for newly constructed dwellings are produced using the Standard Assessment Procedure (SAP) and submitted to the verifier (Local Authority) as part of the completion certificate process. For existing dwellings a reduced version of SAP is used. EPCs for non-domestic buildings are produced using the Simplified Building Energy Model (SBEM). The format of the domestic and non-domestic EPC differs; example certificates can be viewed on the Scottish Government website.
The legislation establishing the EPCs, The Energy Performance of Buildings (Scotland) Regulations 2008, came into force towards the end of 2008, meaning that EPCs exist for all residential property transactions that have taken place since January 2009. Property details recorded for EPCs have to be obtained prior to the completion date of the property sale meaning that the attribute data is available in a timely manner for matching to the price data.
The only buildings which do not require an Energy Performance Certificates are:
- stand alone buildings (other than dwellings) with a useful floor area of less than 50 m²
- temporary buildings with a planned use of two years or less
- buildings with a low energy demand – meaning non-residential agricultural buildings and workshops
- buildings sold for the purpose of demolition
From the EPC data, our main variable of interest is number of (habitable) rooms. Habitable rooms include any living room, sitting room, dining room, bedroom, study and similar; and also a non-separated conservatory. This definition differs slightly to that of the Valuation Office Agency which is the source of number of (habitable rooms) for England and Wales. Given this, the number of rooms variable in both datasets is treated separately as part of the modelling process.
3.2 Practice area 2: communication with data supplier partners
A data sharing agreement is in place between ONS and the Scottish Government. Data requirements, data transfer process and data protection are included within this. This data sharing agreement is reviewed on a 3 year basis. The data is a copy of the EPC Register held by the Energy Saving Trust. Operational contact names are included within this agreement through which any queries are initially resolved.
3.3 Practice area 3: quality asurance, standards and checks by data suppliers
Approved Organisations (AOs) ensure that a minimum of 2% of the total number of EPCs produced by members are checked for accuracy. The sample is based upon a random sample, augmented by any identified need for targeted audit as a result of complaints or requests from other organisations identified by the Scottish Government (for example Green Deal Accreditation Body). AOs ensure that output from any active assessors is checked at least every six months. Where the number of certificates produced by an individual assessor is five or less within a 6 month period, the checking period may be extended to at least every 12 months.
All new members have outputs checked within the first month of active membership. Independent assessment check that:
a. the assessor is certifying within their level of declared competence (where applicable)
b. sufficient evidence is recorded to allow assessment of the building
c. that information recorded was entered accurately
d. there is sufficient in the definition of the building model file
e. 95% of randomly sampled EPCs must be within a defined percentage accuracy compared to an independent assessment of the same building using the evidence contained in assessor records
Certificates identified as being below standard (including incorrect data entry or recommendations) are replaced within six weeks, and corrective action to be taken where assessor activity found to be outside accepted practice.
Each AO is subject to audit by the Scottish Government or by an organisation appointed on their behalf. Since 2012 AO’s are subject to an audit at least every three years. The list of approved organisations is available.
3.4 Practice area 4: producers quality assurance investigations and documentation
The Energy Performance Certificates dataset is one of a set of characteristics (about a property) that is used as an input in the production of modelled house prices, which in turn are used in the production of the monthly UK House Price Index (UK HPI). Details on the UK HPI production methodology are available.
The Scottish Energy Performance Certificates dataset contributes to the number of rooms variable for Scotland as part of the UK HPI.
Quality assurance checks have taken place on the full stock of the data which include completeness checks. 99% of records have values for number of rooms with a similar proportion having values for floor area. Further coverage and data matching checks are conducted on an annual basis during the construction of the weights each year.
Record level checks against independent sources are not currently available given a lack of data availability. ONS are currently looking to acquire data on number of habitable rooms from Scottish Assessors which are collected for the purpose of setting Council Tax. Once this data is available an evaluation will be made between both data sources.
Each month, the Registers of Scotland price data is matched to the Scottish Energy Performance Certificates data. Matching is done by address and a match rate of around 70% is achieved. Data from other data sources are also joined to the dataset prior to the modelling process.
The modelling process used in the production of house price data includes an automated assurance process that assesses modelled house prices for property with a certain set of attributes against the price for a similar property. If the modelled price is substantially different (meaning it exceeds a predefined tolerance) then the price is excluded from being used in the final house price estimate. Around 50 transactions a month (out of around 70,000 transactions) are removed as part of this process. These transactions still contribute towards the volume of transactions published.
The HPI modelling process used can also account for those records where a match cannot be made between the EPC data and price data provided by Registers of Scotland. Each attribute used in the hedonic regression model is given a weight that represents the relative importance of that attribute in explaining house prices. If a record being used in the model has a missing attribute, then the weight of that record is adjusted downwards to represent how important the missing attribute is. This process allows the use of all property transaction data in the calculation of average house prices each month, even though some attribute data could be missing.
For example, a record with no missing attributes would receive a weight of 1, while a record which has all its attributes except rooms will receive a weight of 0.77, and so will contribute slightly less to the final modelled estimate. These weights are calculated from multiple models which are run on an annual basis to determine the importance of each variable.
Following the running of the model, test statistics are analysed to ensure the model has run correctly and fit successfully. This includes analysing the R squared of the model (model fit) and significance of the explanatory variables. An R squared of around 0.8 is achieved. This means that 80% of the variation in price is captured by the explanatory variables. An R squared of 0.8 is high. The old ONS HPI had an R squared of around 0.7.
The data is then aggregated with the resulting series analysed by various breakdowns, over time, and against other published sources of house price growth. Any unexpected movements within the series are explored through the record level data. Monthly curiosity meetings are held to review the new data and discuss any long term trends in the data and its drivers.
4. Strengths and limitations of data
This data has good coverage of addresses in Scotland. An Energy Performance Certificate needs to be obtained prior to the completion date of the property sale which means that the attribute data is available in a timely manner for matching to the price data. There are some acknowledged limitations, Scottish Energy Performance Certificates are only available from 2009. This means that the match rate of Scottish Energy Performance Certificates data to that of Registers of Scotland prior to this date is lower. This may increase the volatility of estimates for Scotland prior to 2009. ONS are currently looking to acquire data on number of habitable rooms from Scottish Assessors which are collected for the purpose of setting Council Tax. Once this data is available an evaluation will be made between both data sources to quantify the potential impact of this lower match rate prior to 2009.
Overall, this data source is judged to be of adequate quality for the use to which it is being put in the UK House Price index.