The government is proposing to force domestic landlords to contribute towards measures to improve their properties’ energy efficiency. In a consultation paper, the Department of Business, Energy and Industrial Strategy (BEIS) proposed landlords should pay up to a maximum of £2,500 to bring their properties up to Energy Performance Certificate Band E.
Minimum energy efficiency standards, which will take effect from April 2018, will require private landlords to ensure their properties meet Band E. Under the existing “no cost to landlord” principle, landlords will be expected to meet Band E or get as close as possible using available third party funding, such as the Green Deal or ECO funding.
An estimated 280,000 domestic private rented properties would not meet the new standard because they are rated Band F and G, according to modelling from the 2014 English Housing Survey. The Energy Company Obligation (ECO), a government energy efficiency scheme in Great Britain to help reduce carbon emissions and tackle fuel poverty, is not sufficient to bring the outstanding stock of private rented homes up to an acceptable level. With no Green Deal scheme available, funding is simply not being made available to tenants to address this issue. BEIS states that ‘As a result of these shifts in the funding landscape, it is highly likely that many landlords of F and G rated rental homes will be unable to deliver improvements in line with the current regulatory requirements. This would be to the continued detriment of their tenants.’
The consultation paper proposes scrapping the “no cost to landlord” rule and recommends that the associated costs of upgrading the properties should be capped at £2,500 per property. If a landlord is able to secure funding for works through schemes like ECO, the costs of works should not exceed £2,500. According to the BEIS analysis, the average cost of improving an F or G rated domestic PRS property to EPC Band E is likely to be £865.
Industry specialists had been calling for the cap to be set at £5,000 and believe that the proposed cost cap of £2,500 is too low. The alternative of a £5,000 cap would double the average energy bill savings for tenants and enable 35,000 more homes to be brought up to the minimum standard. There is also disappointment that third party funding contributions such as ECO or Green Deal Finance are included in the cap. As the cap is intended to ensure that landlords are not unduly burdened, it is widely believed that any financial contributions from other sources should be additional to this and therefore deliver additional energy savings.
The minimum standard regulations also set out a limited number of exemptions which landlords may rely on to avoid the works, most notably where the tenant refuses consent for the work to be carried out. The consultation also asks whether this exemption should be removed to avoid any opportunity for tenants to be pressured to refuse.
The questions being asked are:
- Do you agree with the principle that the landlord should contribute to energy efficiency measures in their properties?
- Should a cap be in place and, if so, do you agree with the limit of £2,500?
- Should energy suppliers be mandated to provide cost saving analysis of energy efficiency measures to landlords?
- Do you have views on whether the consent exemption should be removed from the minimum standard regulations or retained?
The consultation closes on 13th March 2018. We are formulating our response to the consultation and would welcome your feedback to incorporate into this. To have your say, please email the compliance team at compliance@carbon2018.com or alternatively complete the contact form. To discuss this further please call Melanie Kendall-Reid on 01252 87 87 22.