We welcome the ambitious proposals to improve the energy efficiency of the private rented stock. There are around five million homes in this sector in England and Wales, 67% of which are below an adequate energy efficiency level at Band D or below.
The UK Government’s preferred proposal (Option B) uses the headline cost-based metric (EER) on the EPC and a maximum investment cap of £10,000. We think that there is a risk that this metric could stimulate an increase in upgrading gas boilers, lighting and rooftop solar at the expense of thermal and low-carbon heating measures.
The consultation also outlines alternative proposals, including a ‘stretch’ proposal (Option D) that would require landlords to meet Band C using both the cost (EER) and carbon reduction (EIR) metrics with a higher investment cap of £15,000. Our view is that this proposal is better aligned with net zero, the need to get the stock ‘low carbon heat ready’ and would be more effective at tackling fuel poverty.
Compared with the government’s preferred option, the stretch proposal would:
- Deliver almost double the carbon reduction (10.4MtCO2 rather than 6.1MtCO2 over the period of the Fifth Carbon Budget).
- Triple the volume of low carbon heating (700,000 compared 210,000 heat pumps).
- Double the number of ‘worst’ homes bought up to standard (70% of Band F and G homes to C compared with 33% for Option B).
The need for alternative financing
Whether the investment cap is set at £10,000 or £15,000, there are significant regions of England and Wales where neither rental revenue nor asset values will support the necessary financing. Where landlords are willing to undertake the work to a high standard, we would support their access to alternative means of low-cost, government-backed loans attached to the property rather than the owner (where this can be shown not to increase overall bills for the tenant).
Our response also includes recommendations for a robust approach to quality standards, an enhanced role for local authorities and more support for landlords.
The need for advice
The legislation could be challenging for some of the 2.6 million landlords, many of whom work part time or are retired. However, with the provision of alternative finance and a free, impartial and trusted advice support (as exists in Scotland as part of the Home Energy Scotland service) so that landlords understand how to act, it would be appropriately ambitious and achievable.