Blog: Energy efficiency - how to account for regional variations?
With the UK Government expected to require private landlords to reach a minimum EPC C rating in the next few years, concerns are growing about the ability of individual landlords to meet these changes – and particularly how equitable a £10,000 cost cap is across the country.
We set out in our previous blog the case for a tapered cost cap, dependent on the relative Local Housing Allowance across the country.
This will help address the variation across the country in rental income, and will account for some of the differences in property value – and therefore, the ability of individual landlords to utilise the equity in their properties to finance upgrades.
But a graduated cost cap alone is not sufficient.
Green Homes Grant Local Authority Delivery programme
The Green Homes Grants scheme for individuals was – in short – a mess. Many landlords and homeowners were keen to access the scheme but – due to tight eligibility criteria which excluded many who had already taken action to improve energy efficiency, restrictions on eligible installers to only those with Trustmark accreditation, and a lack of local skilled labour in the market – many were not able to take advantage of the funding on offer.
The UK Government prevaricated, initially extending, and then, suddenly, cutting short, the scheme for individuals. But some landlords may not be aware that the Green Homes Grants continued for local authorities.
The so-called ‘LAD’ (local authority delivery) programme has committed £500 million to supporting low-income households across its two phases so far. While the funding is intended to be available across tenures, it is up to local authorities to decide how to distribute it.
We are calling for local authorities to ensure that private sector tenants and landlords are able to access this funding, and for the funding to be distributed proportionately by tenure.
This will ensure that private tenants are not disadvantaged. Government statistics show that just 5 percent of private tenants have received government funding to improve the energy efficiency of their homes. This is less than half of the proportion of social tenants, despite there being a higher proportion of fuel poverty in the private rented sector.
Alongside this, we are also calling for the Government to target LAD funding at areas with lower property values, recognising the greater challenge presented to landlords and homeowners in these areas in financing upgrades.
Stamp duty rebates
Since 2016, anyone buying an additional property has paid an additional 3 percent stamp duty land tax on the purchase value. The surcharge deters investment in rental properties, and has a knock-on effect on the ability of the sector to meet demand. But the Government has shown little interest in removing it – probably because income from additional dwellings accounts for around half of all residential stamp duty receipts.
Relief from the surcharge could, however, be utilised to achieve the Government’s zero carbon ambitions. By introducing a stamp duty rebate for landlords who undertake qualifying measures within 12 months of making a purchase, the Government can both facilitate the upgrade of properties in the private rented sector, and enable those landlords who need to, to exit the market, without risking supply.
Should a minimum EPC C rating be required for existing tenancies in England and Wales from 2028, any properties not eligible for an exemption, but which are not upgraded, will become unlettable. We know that there is a disparity across different regions in the scale of the challenge. Creating a sale market for these properties is essential to ensure that these properties can be upgraded in all areas. Incentivising new investors to improve the energy efficiency or carbon usage of the property by immediately committing to retrofit enables these properties to remain in use.
Of course, house prices across the country vary significantly, too. This is why we are calling for the LAD funding to be targeted at those areas of the country where property values are lower – to ensure that landlords in all areas are able to access the support they need to meet the net zero challenge.
The UK Government department responsible for energy and net zero, BEIS, is presenting at an NRLA webinar on the Local Authority Delivery Scheme and Home Upgrade Grants on Wednesday 24th November at 1pm. Register to attend here.
