Calls for Gov to be Ambitious on Energy Efficiency

The Department for Business, Energy & Industrial Strategy is currently consulting on plans to amend the Minimum Energy Efficiency Standards which come into force from 1st April. Under these standards, new tenancies will be prohibited in properties with an EPC rating of F or G.

You can read all about upcoming MEES regulations here.

Currently, the regulations allow for landlords to register a 5-year exemption if they cannot fund the necessary improvements from third-party sources, such as a Green Deal plan, a local authority grant or the Energy Company Obligation (ECO) scheme.
However, the Government is consulting on plans to remove the “no-cost” exemption and to replace it with a “cost cap”. If the plans go ahead, possibly from as early as April 2019 landlords will be expected to be up to £2,500 per property to reach an EPC rating of E.

The consultation is open until 13th March.

The Government states that they understand the “split incentive” inherent in the PRS, whereby the costs of improvements fall to landlords but tenants are the main beneficiaries.

However, the imposition of a cost cap does little to solve this problem. It will further increase the financial burdens currently being heaped on to landlords and risks the costs being passed on to tenants or the removal of much needed affordable housing from the sector.

Ignoring the Cost

In its consultation response, the NLA is calling for the Government to be more ambitious in their approach, and to move away from its position of burdening landlords with ever-more costs.

The response criticised the consultation for completely ignoring the cumulative impact of Government policies on landlord finances, in particular the lack of recognition of the damage being done by the restrictions to landlords’ finance cost relief introduced by Section 24 of the Finance (No. 2) Act 2015.

The NLA commissioned independent economists, Capital Economics, to model the economic effects of the removal of finance costs relief. Their report can be found at www.taxinghomes.co.uk.

The Government’s Clean Growth Strategy, which states that homes now account for 22% of UK emissions, sets out a target to bring all private rented sector properties up to an EPC rating of C by 2030 “where practical, cost-effective and affordable.”

Incentivise the Change

Instead of a punitive cost-cap the NLA is calling for the Government to incentivise landlords to make improvements by reintroducing the Landlord Energy Savings Allowance (LESA) as the most effective way of reaching its targets.

The NLA argues that if the Government’s intention is to tackle fuel poverty then it needs to get energy efficiency improvements to be made across the whole sector, not just F & G rated properties. As the consultation’s Impact Assessment points out, 89% of fuel poor households are in properties with an EPC rating of E or above.

The Government has indicated that it is not against incentivising landlords in principle, with the Housing Secretary and the Chancellor previously announcing that they will soon consult on incentivising landlords to offer longer tenancies.

This is already supported by the Labour Party in their 2017 manifesto, along with the Government’s Committee on Fuel Poverty and the Energy Efficiency Infrastructure Group whose members include Energy UK, WWF, RIBA and the CBI.

Alternatively, a recent report by the Joseph Rowntree Foundation recommends that specified improvements to properties should be made tax deductible against income tax, rather than Capital Gains Tax as it is currently, as a means to improve the PRS for those in poverty.

You can read the NLA’s response to the cost-cap consultation here, or download below.