Geospatial technology company Kamma has released their analysis of the proposed increases to Minimum Energy Efficiency Standards (MEES) in the Private Rented Sector (PRS).
With 2.9 million homes needing to improve, and an estimated average cost of £9,872 per home, the total bill facing the sector could hit £29 billion.
In its current form the bill leaves substantial unresolved questions on the size and scale of potential loopholes.
The path to Net Zero for UK property took a step forward last month as the ‘Minimum Energy Efficiency of Buildings Bill’ passed the largely symbolic first reading, with actual debate scheduled for the second reading to be held in October this year.
Kamma have released their analysis ahead of time, in order to support this debate, putting data behind some of the key questions raised.
The first of these is inevitably around costs and responsibilities.
Kamma’s analysis of the EPC register for PRS properties highlighted a gap in efficiency, with 65% of properties on the register below the Government target of EPC grade C, compared to a national average of 58%.
In one sense this is a huge opportunity: identifying and improving the estimated 2.9 million PRS properties currently below standard would cut 2.8 million tonnes in annual emissions.
Yet it also comes at an aggregate cost in the region of £29 billion.
Government support has been reduced from the £1.5 billion Green Homes Grant to just £562 million in the form of a nationwide home upgrades fund targeting low income families.
An “equivalent” replacement grant has recently been discussed, but even then there will be a substantial challenge placed on the private sector to find funds for home improvements.
This comes after years of increased taxes on landlords, as Kamma CEO Orla Shields explained:
“The bill itself is a hugely important step in the right direction: it’s right to target poorly performing housing stock at this crucial time in the fight against climate change.
“More consideration needs to be given, however, to who and how this is going to be paid for.
“An increase in minimum EPC from E to C is a dramatic rise and landlords won’t see any short-term benefits from lower fuel bills. Government policy is all stick and no carrot at this point.”
The second question is on the subject of exemptions, which are yet to be finalised but, based on existing standards, create huge loopholes.
Landlords under the current minimum rating of E need to invest only up to a maximum of £3,500, which means 120,000 rental properties can still be let out despite being below an E rating.
Similarly the ‘all improvements made’ exemption qualifies an additional 1,000 that have run out of viable upgrades.
The obvious challenge is that both these categories of exemption will cover far more properties as the MEES is raised. The increased cost associated with increased targets means an additional 2.1 million properties could qualify as exempt, or a staggering 73% of the PRS.
One proposal would see the maximum investment increase to £10,000 but this would deliver a huge affordability challenge to the market and create an incentive for non-compliance.
There are currently 3% of rental homes below the current MEES rating of E but this number is also expected to rise dramatically when the new minimum becomes a C.
This either leaves 2.8 million tonnes of emissions from UK homes still pumping into the atmosphere each year, leaving a hole in the Net Zero strategy for property, or punctures a huge hole in landlord pockets, who may then decide to either not comply or leave the sector.
It also raises the question of fairness as it penalises landlords that have properties in-line with the market average of EPC D and therefore a cheaper route to C, whilst landlords of the worst performing properties quickly hit a cost ceiling.
As Shields continued:”Leaving landlords without incentive or support, but with loophole opportunities to avoid these targets is a dangerous approach.
“It’s vital that policy is able to strike the right balance. Poorer performing properties should be targeted for improvement and the entire sector supported to get there.”
Rents are rising nearly everywhere and at 10% or more in some areas. Will tenants ever kick back against Government for increasing costs fo landlords that are eventually passed onto the tenant?
Tenants are already footing the bill for Section 24 tax relief changes, as well as higher charges to landlords by agents after the tenant fee ban and guess what? Rents will have to rise again to pay for these energy performance upgrades.
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The rental industry should stop complaining.
Landlords should pay to get to EPC ‘C’ and this should be enforced with serious fines.
Exemptions should be cut.
We need to reduce CO2, not game the system.
Anyone trying to avoid reducing their carbon footprint is 100% part of the problem not the solution.
If landlords can’t afford it they shouldn’t be landlords.
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Hahaha, who do you think will pay for it? Increased costs are always passed on to the end user! So don’t complain when rents rise again.
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So landlord sells, which will create an even bigger shortage of rental stock, pushing rents up even faster, be careful what you wish for.
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There are more private owned and occupied properties in the UK that do not meet the current PRS minimum level of E. Maybe you should be talking to them, they would make a far better impact or are you going to suggest they shouldn’t be home owners!
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These government affordable housing commitments seemingly aren’t going too well
You can’t seriously expect to increase landlord’s cost year on year and not expect to create a shortage
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Why the rush from E to C? A move from E to D and a gap of (say) 5 years before moving to C would make better sense.
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Now be fair. When have you ever known any government to do something sensible?
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I deal with a lot of older properties, farmhouses, Victorian/Edwardian terraces etc, and there simply is no way to get them to a C, especially if you live in a conservation area.
I work with my Landlords to provide the best housing we can, but if a Landlord has had the boiler and the windows done in the last 5 years, and cannot get cavity or other wall insulation (due to construction), what else can be done? I’ve already had a few Landlords complain that their Tenant has newer windows/boiler/insulation etc than they do themselves, as the money they were saving up to do their own has had to be spent on the Tenants!
The Government, and Tenants, will have to face up that the costs for this will be passed on down the line.
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Utter nonsense and a clear case of government decision makers not knowing what they are doing and jumping along blind folded with the ‘green policies’.
We have a very BIG variety of property styles in the UK, some going back to 1500’s, possibly longer. As a surveyor I have been assessing EPC since conception in 2007 and the costs to retrofit properties in the main pre 1920’s can only bring the grade from an G or F to an E which is an affordable proposition for landlords. To get to a D requires several £k’s and those horrendous things stuck on the roof and cannot get an C no matter what for properties built between 1950/70’s and that relates to .
Why pick on PRS (4.5 million properties in 2017) which is a quarter of properties? Home ownership/occupancy is far greater numbers and makes a difference, but wait till you start telling them its going to cost them over £10,000 to fit solar and ground or air source heat pumps, if you dare. Many, if not all pre 2000 properties are a D.
Maybe time Government made it a minimum Band C to sell a property …. wow watch the fall out on that one.
This will be yet another nail in the coffin for PRS, as landlords will not stomach it and leave either on principal or not cost effective. Most landlords are amateurs (in the nicest way) and come into the market from inheritance, which are old properties. You can only increase rent to a limit before it all goes horribly wrong and having tenant living on the precipice of affordability is insane.
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And the elephant in the room…
EPCs currently favour gas central heating.
I am refurbishing a flat and want to refit with an electric boiler (with a wet central heating system) on the basis that this would benefit the environment at the expense of increased running costs. I am also upgrading the windows and insulation at the same time.
All this hard work and I will be lucky to get a “D” at best.
Surely, this is the route that EVERY property should be going down, if possible.
But it looks as though I can get a high C or low B if I put in a gas combi boiler.
Somebody needs to have a proper think about this.
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The algorithm behind the calculation is heavy guarded and needs to be more transparent. It is all based on cost efficiency with KWh gas vs KWh electricity. Electricity is still assumed to be much more carbon intensive. I wonder if they have ever actually included the shift towards renewable energy sources for electricity into the EPC.
We had to install gas boilers in properties which run electric on green energy contracts. They were more carbon neutral than any new set-up we could ever achieve. But they had a G.
If we want renewable energy to take over then the EPC algorithm must be constantly re-evaluated and changed according to the proportion of carbon emissions and not only the cost of KWh. And the process must be clear and open source and not behind sealed doors.
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It will ONLY apply to the PRS, not owner Occupied or Social Housing. Consider it a legal back-door to forcing landlords to off-load, sell their properties at a discount to First time buyers.
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That’s the issue though isn’t it? Or it certainly is here. They don’t sell below market value and, truth be told, demand is still outstripping supply for housing, both rental and sale. Having just moved onto a new housing estate I can truly say that every two bed went to an owner occupier either starting out on their journey (predominantly) or downsizing so far on this development and the one opposite it, so I also call BS on what I am seeing here in the market at the moment when people like Acorn and Shelter are telling us Frist Time Buyers are being priced out and having to rent…
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