PM’s net zero U-turn could be costly

When Rishi Sunak decided to rip up the Government’s commitment to pursuing a raft of energy saving policies he consigned more than a million private sector households to remain cold and shivering in their badly insulated and draughty homes for the foreseeable future.

Although the PM emphasised that what he was doing was being fair to the British people and the revised plans would ease the burden on working people, these claims would have rung hollow with private sector tenants.

However, their landlords were probably cheering the PM to the rafters for saving them potential insulation bills of up to £10,000 for NOT having to make their properties more comfortable to live in.

Rising fuel poverty

According to the pressure group Generation Rent, since 2010 fuel poverty has fallen by 35% among owner-occupiers and by a massive 54% among council tenants, but by just 4% for private renters.

These changes mean that one in four private renters (24.1%) is living in fuel poverty, a higher rate than any other tenure. In total, 1.19m private renter households are fuel poor, compared with 1.33m owner-occupied households, which represents a much smaller proportion, 8.8%, of their tenure.

To make matters worse - five times as many owner-occupiers (1.69m) have received energy efficiency grants than private renters (330k), despite households in fuel poverty being almost as likely to be in a private rented home than one they own.

Bypassing the needy

In effect the money that is supposed to tackle fuel poverty is bypassing the people who need it the most. It means they are paying disproportionately higher amounts of their income on heating and at the same time time their health is suffering from living in cold, damp and draughty homes.

Therefore, it was probably with a huge sense of relief and expectation that private renters learnt of the Government’s plans (back in 2021) to force landlords of the coldest and draughtiest homes (in EPC bands D to G) to invest in bringing them up to EPC band C.

Afterall energy efficiency measures that bring a home up to EPC Band C will also lift a household out of fuel poverty.

Landlords were to be given until 2028 to make the necessary changes for all rentals, or they would no longer be able to rent out any properties that fell below that standard. Continuing to let properties below band C could have meant landlords were liable for penalties of up to £30,000.

A costly U-turn

Back in August, the Housing Secretary Michael Gove started wondering out loud (and in newspaper columns) if landlords should be given longer to carry out the improvements. And then the Prime Minister decided to cancel the requirement altogether, as one of his most dramatic U-turns.

Now I wonder how many Conservative MPs let out properties they own? Or how many of his backbenchers receive donations from private landlords? But before I get accused of impartial cynicism, lets look at what others are saying of this specific decision.

For instance, private renters will pay £1bn a year more in energy bills because of the scrapping of the proposals to make landlords upgrade the insulation on their properties, according to the Social Market Foundation.

Peter Chalkley, director of the Energy and Climate Intelligence Unit (ECIU), said the changes would not save renters any money and would actually end up costing consumers more.

Quality concerns

Last year, research by the ECIU found that people living in more poorly insulated homes would have to spend almost £1,000 more on gas over a winter.

Their analysis found that homes rated in EPC band F are likely to have a gas bill £968 higher than a home in band C, while houses that are rated in band D will have to pay £420 more for their gas compared with those in band C.

Chalkley said: “The one measure that would have brought down bills is the landlord energy efficiency rules. Rented accommodation is some of the worst quality and so most costly to heat with tenants having no power to insulate themselves. [This] will add to the cost of living for those struggling, not make things easier.”

Even private landlords don’t seem convinced that the measure stacks up or makes sense on its own.

What landlords want

In reiterating its commitment to energy efficient homes, the National Residential Landlords Association (NRLA) said that it is vital the Government now develops a comprehensive plan to ensure the private rented sector gets the support it needs, along with a clear timescale for change.

Ben Beadle, chief executive of the NRLA, said: “The NRLA wants to see all properties as energy efficient as possible. However, the uncertainty surrounding energy efficiency policy has been hugely damaging to the supply of rented homes. Landlords are struggling to make investment decisions without a clear idea of the Government’s direction of travel.”

He added: “It is welcome that landlords will not be required to invest substantial sums of money during a cost-of-living crisis when many are themselves struggling financially. However, Ministers need to use the space they are creating to develop a full plan that supports the rental market to make the energy efficiency improvements we all want to see.

“This must include appropriate financial support and reform of the tax system which currently fails to support investment in energy efficiency measures.”

In the meantime, the NRLA has advised its members that it is seeking more detail from the Government and will update its member landlords in due course.

What next?

So where do we go from here? Generation Rent are calling on the Government to amend the Renters (Reform) Bill to protect tenants who receive an energy efficiency grant from:

– eviction on “landlord need” grounds, such as sale, for at least six years, which they estimate to be the time it would take for the average grant to translate into energy bill savings; and

– any increase in rent that reflects the improvements that the grant made to the property when assessed by the First Tier Tribunal.

Landlords should also be required to raise the energy efficiency rating of their properties to C, to oblige them to accept grant-funded works to their property.

These measures would allow tenants to enjoy the energy bill savings of the improved property, giving them a stronger incentive to apply for a grant in the first place.

With measures to make sure the financial benefit of grants goes to the tenant, by preventing evictions and rent increases arising from the home’s improvement, Generation Rent believes we can slash carbon emissions and jump-start improvements to renters’ living standards.

What’s not to like about that?

Surely even Rishi Sunak who wants to save money for hard working families can see the logic of this. It may also save him the embarrassment of losing a legal challenge to this cut in home insulation work.

Patrick Mooney is news editor of Housing Management and Maintenance magazine