Keeping it local – a better approach to energy efficiency

From April 2016, landlords will not be able to refuse ‘reasonable’ requests from tenants, or local authorities acting on behalf of tenants, to improve their property.

From April 2018, the Government will make it unlawful to rent out a house or business premise which has less than an E energy efficiency rating. The Government says this will ensure that at least 682,000 properties will have to be improved.

At first glance this is well worthwhile, but what are the possible complications?

What happens to people in rented homes if major work such as internal insulation of solid brick walls is needed, or is it likely that sufficient improvement can be made with little upheaval?

What if the landlord cannot afford the improvements? I did once rent a flat and the landlord sometimes drove round in a Rolls Royce when collecting the rents from his numerous properties, but I doubt that all landlords are rich.

There will always be complications, but the principle for home insulation is good and we should not be put off by a minority of possible problem cases. What is not clear is how much increase in rent the landlord can expect. The tenant will no doubt still need to balance the energy savings they make against the possible cost increase, as would house owners. No doubt needy tenants will get assistance.

Here is an article on the subject: http://www.theguardian.com/environment/2015/feb/05/landlords-draughty-homes-ban

This article indicates that the UK has a high level of fuel poverty, though it is not stated whether the figures given represent those in rental properties or all housing. The sooner we sort out our crazy energy pricing the better, since many are paying more for energy than they should be.

The legislation applies only to England and Wales, yet parts of Scotland can be very cold.

I am not overly impressed by these new regulations – getting properties up to an E rating is no big deal! Whether landlords will be able to raise the rent is an interesting point. It might depend on the local rental market and the availability of other lets with better energy efficiency for the same rent. Where rental demand is high landlords have been getting away with letting sub-standard properties at excessive rents for years. This does at least put a floor under the energy efficiency standard and properties rated E should be at the bottom end of the rent scale, all other things being equal [which they never are of course]. The further away you get from metropolitan areas there is an increasing likelihood that the supply of lets will exceed demand; it does around where we live and rents have been static or declining for a long time except for brand new properties with high thermal efficiency. Some landlords are not doing very well at all financially and those with a number of low-rated properties might struggle to bring them up to the required minimum standard – they’re in a tight spot and will have to balance the cost of improving the property [and possibly increasing the income] against selling it at a capital loss.

I’m an Energy assessor and I can assure you an “E” rating is nothing to get excited about, well below average.. I would be setting the bar at a “D”. I would also explore legislation that makes it a requirement that a “D” rating is required to sell a property, although I know that could cause problems in selling “fixer upper” type places but there must be some way houses being marketed are categorised to allow for this.
Stamp duty rates and council tax rates could also be linked to EPC rating as further incentives to improve efficiency and in the long term save on energy bills.

To the extent that the EPC rating affects the value of property on sale [it’s debatable because location and accommodation count for so much] Stamp Duty Land Tax does reflect that factor above the starting level.

Setting Council Tax rates to incentivise energy efficiency while remaining revenue neutral across all the properties in the local authority area would mean a redistribution of the charge possibly penalising those who can least afford it.

Not necessarily John. If we had a decent efficiency subsidy or grant system rather than the “not fit for purpose Green deal” the only people penalised would be those too lazy to take advantage of what’s on offer. Besides I was thinking more in terms of a council tax band setting related to the EPC rating when a property changes hands. That would affect property prices, and rightly so too.
You are however correct in that currently the EPC rating has little if any relationship to any given house price, and I very much doubt if an EPC rating ever made or broke a sale. It might though have some bearing on offer prices and affect how easily a house sells. That is for those potential buyers who actually look at the EPC. Looking costs nothing and in this case just looking can be very helpful to buyers.

Since it is in many people’s financial interests to improve the energy efficiency of their homes – the savings more than repay the money spent – why is it thought a subsidy or grant (that is using yours and my money taken as taxes) is appropriate? If anything, what is needed is a loan system at a fair interest rate for those unable to raise the capital.

That is one way of looking at it. On the other hand, cutting down total energy use by the population is of benefit to everyone by cutting expenditure on increasing capacity of the industries. Grants and subsidies have a long history, so governments past and present seem to think they are a good idea. I was not impressed by the solar feed-in tariff, which at its original rate was quite lucrative and those without the benefit of solar panels were subsidising.

If someone cannot afford the capital for home improvement, is it wise to encourage them to take out a loan on the basis of long term savings? That could be a recipe for disaster.

I’m suggesting the criterion to be used would be a loan where the repayments are less than the annual saving. That makes financial sense, and will ensure that viable improvements are considered and made. One difficulty with grants and subsidies is the cost of administering them – often employing commercial companies to examine proposals and only using approved contractors to carry out the work. This is best left to the individual to decide and finance – many improvements can be made by diy for a lot of people .

That I do support, provided that homeowners don’t botch work, which could cause problems for themselves and subsequent owners of the property.

Unless you live on the coast with rain almost constantly lashing your outside walls you are extremely unlikely to get problems with ,modern cavity wall insulation.Most of the very few properties that do encounter problems had existing issues.
I’ve had no problems for example in my 1936 cavity walls which have “blue bricks” rather than a damp course, and although I don’t live on the coast I am in an exposed rural area.

Sophie, one of my points was meant to be that if an energy saving measure saved more money on your energy bill than it cost to implement (over a period) with a loan at a sensible interest rate then it becomes affordable. Maybe the Govt or energy companies make such loans available – but not the green loans which seem to involve high interest and admin charges.