Government cash vital for landlords to hit eco targets

NRLA chief executive Ben Beadle outlines proposals for a new scrappage scheme that would allow landlords to swap old windows for new energy efficient replacements

Landlords often lose out when it comes to energy efficiency incentives.

Research revealed that just five per cent of private rented households have received Government help to fund energy efficiency measures, despite having the greatest need.

Now, with ambitious energy efficiency targets set to be imposed on the private rented sector, we at the NRLA are proposing an innovative new scheme to help.

The proposals would see Government cash invested in a new window scrappage scheme, that would allow landlords to swap old for new, meaning lower utilities bills for tenants, while helping landlords meet energy efficiency commitments.

We are also calling on the Government to make energy efficiency works tax deductible.

The challenge

The Government has committed to achieving net zero carbon emissions by 2050.

It is also proposing to increase the minimum Energy Performance Certificate (EPC) rating to C for new private rented sector tenancies from 2025 and existing tenancies from 2028.

This is despite the fact that a third of private rented sector homes were built before 1919 which makes it harder to carry out improvements.

And with 2.9 million PRS properties - 62% of the total – having an EPC rating of D or below it is clear investment is needed to help bring properties up to standard, if landlords are to stay in the market.

In a survey by the NRLA and deposit partner TDS it was discovered that 27% of landlords that will be affected by the new rules said they would sell up – which would have a major impact on the number of homes available to let.

The cash

Historically the PRS has lost out when it comes to incentives to improve a property’s energy efficiency.

Just five per cent of PRS households in England have received support from the Government, compared with 21 per cent of owner occupiers, 12 per cent of council householders and 11 per cent in housing association homes.

According to Government figures, it would cost an average of over £7,500 to bring rental properties needing it to an energy rating of at least C, with a proposed £10,000 cap on the cost of works.

However, with the average net annual rental income for a private landlord being less than £4,500 it is clear this will be unaffordable for a significant number.

Green Homes Grants

Ministers had tried to bring about positive change through the Green Homes Grant scheme.

Launched in September last year it offered vouchers of up to £5,000 to homeowners including landlords, to be spent energy efficiency improvements – subject to conditions.

However, it was axed just six months after it was announced due to low take up, in part as a result of complicated criteria that rendered many landlords ineligible.

The Government set aside £1.5 billion for the scheme in 2020/21 and £320 million for 2021/22.

The solution

The NRLA wants to see this cash funnelled into a new simplified scheme that will target those PRS homes most in need of improvement.

The proportion of homes without double glazing is higher in the PRS than any other tenure therefore we believe this is an area where investment could see the biggest impact.

Under our proposals the scrappage scheme could operate in a similar way to the boiler scrappage scheme, which was introduced by the Government in 2010.

This saw 125,000 vouchers for energy efficient boilers given away. The vouchers allowed users to upgrade to a more energy efficient central heating scheme, which on average reduced energy bills by £200 per year. All were snapped up within three months.

For windows the priority would be replace single-pane windows, then secondary glazing, and older, less efficient double glazing.

We are also calling for energy efficiency measures carried out by landlords to be offset against tax as ‘repair and maintenance’. At present they are treated as an improvement at sale against Capital Gains Tax.

This would address anomalies including that, whilst replacing a broken boiler is tax deductible, replacing one for a more energy efficient system is not.

Financial support package

We all want to see energy efficient rental homes and these simple changes would go a long way towards realising that.

They cut bills for tenants, make homes more attractive to potential renters and help the country to achieve its net zero commitment.

We are now calling on the Chancellor to develop a financial support package that works for landlords and tenants.

This should especially be targeted at the hardest to treat properties where the cost of work will be prohibitive for landlords. In this way, he will also be doing the most to help those in fuel poverty.