The Government has recently succeeded in getting home insulation and energy efficiency as a topic onto the newsstands and into broadcasts on radio and TV, but it now faces a much tougher task of getting green heating systems and better insulation into the nation’s privately rented houses and flats.
These properties are among the least energy efficient in England, costing over £6bn in energy bills in 2018 and producing greenhouse gas emissions of around 11 megatonnes of carbon dioxide equivalent (MtCO2e) per annum.
The privately rented housing sector also accounts for a disproportionate number of fuel poor households, with 18% of these households in fuel poverty, compared to 8% of owner-occupiers and 9% of social housing households.
These factors have combined to create a situation where the private rented sector consists of our coldest homes, which cost the highest amount to keep warm, while at the same time posing a health risk to its occupants through high incidences of damp, condensation and mould.
Further intervention is needed to ensure that energy performance continues to improve
Upgrading 3 million rental homes
The Government is determined to change this and has drawn up a series of measures to ensure nearly 3 million privately rented homes are upgraded to modern energy efficiency standards by 2028. It has launched a consultation on how it plans to achieve this, with a closing date of 30 December 2020 for receiving responses.
In the executive summary of the consultation document, the Government states: “Improving the energy performance of these homes is a vital part of our wider strategy to decarbonise buildings cost-effectively, in light of the significant challenges posed by climate change.”
The Government is planning to publish it’s response to the consultation exercise in Spring 2021 and then plans to lay regulations in the Autumn of 2021 which would amend the Privated Rented Sector Regulations, prior to them coming into force in April 2025.
At the centrepiece of its proposals, private landlords will have to ensure that all of their rental stock meets Energy Performance Certificate (EPC) Band C requirements. Currently only around 33% of privately rented homes are rated at EPC Band C or better.
Recognising the scale of work required there will be a degree of phasing in, so properties let to new tenants will have to conform to the new Band C requirement from April 2025 and then to all tenants by April 2028.
There has always been an added complication within the sector whereby the costs of upgrading a property fall onto the landlords (as owners of the property), but the benefits of lower bills and/or a warmer home are enjoyed by the tenant. As a result of some financial modelling, the Government is saying that landlords will also benefit from increases in property values, where improvements to EPC Band C are achieved.
A cap on costs
The Government recognises that achieving these improved levels of energy efficiency in the current stock could be very costly, so it is proposing to place a cap of £10,000 on the value of the works which landlords are required to pay for.
It expects the average cost of works per property will be closer to £4,700 and this will produce an annual saving of £220 in the average fuel bill for tenants.
To encourage greater compliance with the proposed regulations, the Government is proposing to:
- Introduce a requirement that letting agents and online property platforms may only advertise and let properties compliant with the new regulations
- Require landlords to provide an EPC prior to a property being placed on the market; and
- Raise the level of the civil penalty fine for non-compliance with the requirements to obtain, commission or make available an EPC. These fines currently stand at £200, but could be increased in real terms or set at a multiple of the property’s monthly rent
The Government expects compliance and enforcement of the regulations to remain with local councils. However, it considers the existing housing law, which gives council officers powers of entry to private lets, including to inspect for health and safety hazards, are disproportionate to their intended purpose.
Instead it proposes to enable councils to give notice to landlords that they wish to inspect, requesting permission from landlords and any tenants in situ to carry out an inspection at an agreed time.
Tenants are to be given the power to request that non-compliant landlords carry out energy performance improvements. In addition, the Government proposes that tenants should be able to request redress from their landlord, recognising that the tenant may be paying higher energy bills as a result of their rented property not meeting the required standard.
There are other issues included within the consultation document including such topics as:
- “We are seeking views on how we ensure energy performance improvements are carried out to a high standard: for example, by requiring landlords to choose a TrustMark- registered provider or installer for energy performance works; and
- “We are seeking views on how to support the uptake of smart meters in the private rented sector.”
The new consultation builds on an existing regime of regulations, brought in two years ago which require landlords to spend up to £3,500 to upgrade rental properties to a minimum energy efficiency standard of EPC Band E.
The Government has clearly decided that further intervention is needed to ensure that energy performance continues to improve in the private rented sector, helping the country to deliver against its statutory greenhouse gas emission reduction and fuel poverty targets, as well as driving wider policy outcomes such as reduced energy bills and improved security of energy supply.