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Are we missing an opportunity to transform the private rented sector?

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As well as its Fuel Poverty Strategy consultation, DECC recently published a consultation on introducing new energy efficiency regulations to the private rented sector.

We were as delighted as this kitten at tHappyCathe prospect of these regulations. The private rented sector is growing rapidly and has very few effective controls on housing quality or energy efficiency. A set of regulations that would drive change would be very welcome, particularly for the more than 1 million fuel poor households living in the sector.

So what does the consultation say?

The two big headlines:

  • Minimum energy efficiency standards will be in force from April 2018.
  • And tenants will have a right to request energy efficiency improvements which can’t be reasonably refused by their landlord. That comes in from April 2016.

Let’s dig a little deeper:

Why the private rented sector matters

The private rented sector (PRS) is a hotbed of fuel poverty – 21% of PRS households are fuel poor, compared to 8.5% in the owner occupier sector.

And it’s an energy inefficient sector – 11% of PRS homes have an F or G rating for energy performance. DECC’s consultation paper suggests that there are 190,000 households that are fuel poor, in the PRS and living in an F or G rated home.

So a laser-focused approach to improving energy efficiency in the private rented sector would be to introduce minimum energy efficiency standards to bring all those F and G rated properties up to an E rating (as proposed in the consultation).

Or is it?

Why the energy efficiency might be missing something

If 21% of households in the PRS are fuel poor, that’s over 1 million households. These proposals will help 190,000, a good proportion undoubtedly, but where are the others? Given that the new definition of fuel poverty requires households to have higher than typical energy costs, this means that there are over 800,000 households living in the private rented sector AND in fuel poverty who will not be helped by the introduction of a minimum standard E-rating.

Luckily, there’s talk in the consultation of a trajectory for minimum standards, most likely a ratcheting up to D, C and so forth at different points in time. There’s recognition that the process will need to be formalised, to give the energy efficiency industry some sense of certainty about the likely levels of works required. So just hang in there, fuel poor family in an E-rated home, something will come along to help you soon.

The minimum standard comes in from April 2018 for new tenancies. Government would like a “backstop” date, at which any properties that haven’t had a new tenancy would fall under the regulations and are proposing April 2020. So, if you’re a tenant living in a cold home in 2017, and you stay in that home for a few years, the regulations to keep you warm won’t come into effect until 2020. Let’s hope that the winters of 2018 and 2019 aren’t too harsh…

The energy efficiency standard: the real kicker is that you don’t have to meet it

I quote: “the Government is committed to ensuring the regulations do not entail net or upfront costs to landlords for the required improvements”. Landlords will have to use ECO, grant funding or Green Deal to pay for measures, but if the measures don’t reach an E rating, well, that’s just fine, landlords can stop at the point where measures stop being cost-effective because they do not reach the “golden rule”.

Now bear with me here, but didn’t DECC’s own Fuel Poverty Framework say that the properties with the most severe fuel poverty and the ones we really need to be treating tend to be larger, older homes, in the private rented sector and not connected to the gas grid.

  • Large = expensive.
  • Older = in need of more expensive measures.
  • Off the gas grid = no cheap and easy gas boiler solution available.

The proposed regulations say “do what’s cost-effective” but the job which needs to be done is NOT cost effective. Green Deal doesn’t stack up for solid wall insulation – that was the whole point of CERO (cut) and the GD HIF subsidy (no longer available). And ECO rates are so low, that they barely cover the costs of loft and cavity wall insulation, let alone solid wall.

Our neat idea about the costs of Green Deal Assessments

Government’s concern for the welfare of private landlords is such that they don’t even want landlords to have to pay the £100 or so cost of a Green Deal Assessment…. Actually, the handy way around this is to make landlords pay (Green Deal Advisors have to eat, you know), but to make the cost tax deductible for those registered as landlords. There’s already precedent for a landlords’ tax allowance. Neat, eh?

What about the right to request improvements?

The tenant can ask the landlord for improvements based on an EPC, a Green Deal Assessment or a surveyor’s report. So far so good. But the tenant also has to provide written evidence of a Green Deal Finance Plan (which presumably can’t be taken out without the landlord’s permission in the first place?) or ECO or grant funding, or quotes for getting the works done. That takes a lot of effort and motivation – and the commitment to cope with any building works – potentially from a tenant who wasn’t planning to stay for more than a couple of years (average tenancy length: 19 months).

There are various ways in which a landlord is allowed to refuse. Oh, and of course, the tenant can only request things where there is no upfront cost to the landlord.

What?

Oh yes. That again. No upfront cost to the landlord. Now this may be fine if you’re a tenant who’s savvy enough to get involved with Green Deal. But now we’re potentially asking fuel poor and vulnerable tenants to do all of the legwork to get grant funding lined up for energy efficiency measures and, if that grant funding doesn’t cover all of the costs, to pay for the rest of it themselves.

Think about our 800,000 fuel poor households in the PRS whose properties aren’t F or G rated. These are households below the poverty line and with higher than typical energy costs. If energy efficiency programmes won’t cover the costs of measures, we’re expecting tenants to (rather than their much wealthier landlords). Doesn’t this just put even more pressure on a group of households that are already financially stressed?

So is it all doom and gloom?

grumpy-cat-still-hates-everyone-at-south-by-southwestWe really hope not (we don’t want to be like Grumpy Cat here). Regulation has the power to drive a lot of change in the private rented sector, but these regulations… don’t. The energy efficiency standard is scratching the surface of a much bigger problem (the 800,000 fuel poor households in E-rated homes), and the share of effort and costs seems to be balanced completely in the favour of the landlord and nowhere near the interests of the tenant.

Perhaps the consultation responses will help to nudge the balance back again. Perhaps the emphasis should be building on the HHSRS to make the point that no landlord should be able to rent a home that presents a health hazard from cold, and on communicating that landlords have a duty of care both for their tenants and for the buildings that are in their custody. Many of these buildings will outlive us all, but it seems that the consultation is putting the short-term interests of one group of people ahead of the short-term interests of another, less wealthy group and the longer term interests of maintaining the UK’s asset base.

You can download the full consultation document at https://www.gov.uk/government/consultations/private-rented-sector-energy-efficiency-regulations-domestic.

There’s a webinar from 3pm – 4pm on Wednesday 20 August – you can register at https://www.eventbrite.co.uk/e/webinar-energy-efficiency-regulations-for-private-rented-homes-tickets-12634523199

Responses to the consultation have to be made by 2 September 2014.

 

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