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Bigger push needed to improve energy efficiency in private rented sector

Also in this section

•  Improvements should be made to landlord legislation
•  Help for tenants needs to be at heart
•  More investment can bring big gains for property owners, too

Britain is increasingly a nation of renters – with a quarter of households set to be renting privately by 2021. But the private rented sector also features the least energy efficient properties in the country, which puts more people in danger of fuel poverty and ill-health from cold homes.

We have just responded to the government’s consultation on improving energy efficiency in the sector. Clear, effective policy is much needed, and has the potential to improve lives and reduce tenants’ bills.

We strongly support the ambition laid out in the recent Clean Growth Strategy to bring private rented homes to Energy Performance Certificate (EPC) Band C by 2030. The first step on the road to Band C is a minimum Band E standard that will apply to privately rented homes from April this year.

But there’s a big loophole in the form of the ‘no-cost-to-the-landlord’ principle: landlords of cold, F and G banded homes will only have to hit the “E” target if they can get a grant for 100% of the costs of the required improvements. If not, they don’t have to make improvements and can carry out letting out their F or G banded home as before.

In the Clean Growth Strategy the government effectively agreed with many energy efficiency campaigners that this is not adequate. Landlords should have to pay towards the improvements needed to bring their home up to a decent, minimum E standard.

So the recent consultation sets out the government’s revised plans for the minimum E regulation.  The plan is that, from April 2019, landlords of homes below an E standard would have to pay a maximum of £2,500 towards the improvements. If costs of works go above that, they can continue letting out their home with an F or G banding. 

Investment to fit the challenge

The Energy Saving Trust strongly welcomes the fact that government now agrees that landlords of the coldest homes should have to pay towards bringing them to an E standard.  Official documents link homes rated “F” and “G” with a high risk of ill-health caused by cold.

But we believe that what’s on the table still strikes the wrong balance between landlords and tenants, and more should be done to aim for higher standards than the legal minimum Band E level – towards ‘fuel poverty proof’ homes.

Energy Saving Trust and a number of other organisations believe that a £5,000 cap would be more appropriate.

Since landlords are private businesses, there should be set standards required to operate in the market – and reasonable investment made to get there. Yet the government’s current suggestion to cap landlord contributions at £2,500 is only likely to get 30% of the worst performing homes up to Band E, according to the government’s own impact assessment.

Not only that, but this preferred cap will leave over half of F and G homes with no improvements whatsoever, with many of these being the harder to treat G-rated energy efficient properties; while Band F homes are targeted for ‘quick wins’.

On the other hand, £5,000 will see 42% reach band E, and nine in ten will receive at least some energy efficiency improvements. We think this is a much more appropriate figure.

Help (could be) at hand for landlords

This level of spending is not a huge burden for landlords. Only a small number of properties would be affected by the higher expenditure cap, just a proportion would have to spend the full amount, and only small numbers would be tempted to raise rents or take their property off the market as a result.

In addition, help could be made available in the form of designating steps to improve energy efficiency as repairs rather than improvements, and reducing VAT on the purchase and installation of measures.

Cut the get-out clauses

In our response we’ve also made clear that we don’t agree with government proposals to include no-cost finance options such as the Energy Company Obligation (ECO) as part of the capped sum.

Meanwhile, we agree with the government that landlords should have to provide three quotes in order to prove that measures to get their home up to Band E will fall outside the financial limits, and that work carried out before 1 October 2017 should not be included in the cap if it has not brought the property up to minimum standards.

Clarity and good advice needed

There are some key communications issues to address, too. The 2030 Band C target should be included in government communication to local authorities and landlords as soon as possible, while effective advice and guidance needs to be made available for landlords to get their properties up to scratch.

We believe it would be fairer to landlords to set out when minimum standards will be increased to deliver the 2030 target, so that they can take action now to future proof their properties. In Scotland the devolved administration has already announced that a minimum standard of EPC band D will come into force in 2022.

In general, we don’t think that the benefits to landlords have been spelled out to the same degree as the costs. There are many positives to be found, including the likelihood of reduced rent arrears and properties without a tenant, as well as increasing the value of homes.

Shifting the policy balance in tenants’ favour is hardly likely to spell disaster for landlords – but it could make a significant difference in the national fight to reduce fuel poverty.

This blog is just an overview of our consultation response. You can read it in full here.

Gary Hartley's picture
Gary Hartley is Energy Saving Trust's expert blogger. He has extensive experience researching and writing on a number of topics, with particular expertise in sustainable energy, policy, literature and sport. As well as providing regular blog content, Gary has also been published in numerous magazines and journals.