Tepilo looks at why the government needs to lend its support to landlords when it comes to energy efficiency.
Some properties may be unrentable by 2018
Nearly one in ten properties in the private rented sector (PRS) could become ‘unrentable’ by 2018, according to new data released by Quick Move Now, assuming the government plans for new energy efficiency legislation goes ahead.
Around 18 months from now, on April 1 2018, proposed new legislation will make it illegal to let a property with a poor energy efficiency rating. Currently, properties are graded from A- to G- depending on how energy efficient they are – under the new laws, any property being let in the PRS would need a minimum energy performance rating of E- on an Energy Performance Certificate (EPC).
However, according to the data, approximately 8% of rental homes currently available do not meet the minimum energy efficiency requirements the government have put forward.
With the UK already facing a critical lack of rental supply, losing roughly 8% of the rental market could prove catastrophic. As we know, demand for rental properties has been on the rise for years – in fact, according to research carried out by the Royal Institution of Chartered Surveyors (RICS), the number of UK households renting property more than doubled from 2.3 million in 2001 to 5.4 million in 2014. That figure is expected to rise again – by a further 1.8 million, RICS predicts – before 2025.
So, demand is very much on the rise, but for a variety of reasons supply is not keeping up. The additional 3% stamp duty surcharge on second homes, tougher buy-to-let lending and squeezed profits are all possible reasons for this, with some landlords and investors feeling as if they have been a convenient target for the government to aim various darts at.
While everyone recognises the need for properties in the PRS to be of a very high quality and to score highly on energy efficiency, there is a danger that some homes could fall through the net when these changes come into play.
Those in the industry commend the government’s ambitions on energy efficiency, but some are concerned about the workability of the new legislation. As a result, they are calling for aid and support to those landlords who need to make the relevant changes. This is even more so the case now that the government has stopped funding Green Deal improvements.
The Green Deal was set up to help people make energy-saving improvements to their home – including heating, draught-proofing, double glazing and renewable energy generation, e.g. solar panels or heat pumps – as well as finding the best way to pay for them. This, though, was axed in July 2015 by then Energy Secretary Amber Rudd.
The extra pressure to make homes more energy efficient also comes at a time when landlords are feeling a number of other pressures already, namely the aforementioned increased stamp duty, upcoming changes to mortgage interest tax relief (phased in from April 1 2017) and the repercussions of the proposed ban on letting agents’ fees.
While a mass exodus of landlords from the market is unlikely, it could be the case that a small number do decide to leave at a time when supply is needed more than ever. For landlords whose property requires significant improvement to its energy efficiency, there needs to be the support in place to bring these homes up to the necessary standard.
Fortunately, it’s only a small number of landlords that will need to upgrade their energy efficiency. Stats from the Residential Landlords Association (RLA) show that around 7.9% of properties currently fall under the required energy efficiency standard of E-. By contrast, 20.9% of rental properties have an energy efficiency rating of E-, 35.5% have a rating of D-, 26.6% have a rating of C-, 8.8% have a rating of B- and just 0.1% have the top rating of A-.
Nonetheless, the government needs to be aware of those properties that have a rating of F- or G- and work with their owners to bring this up the required standard.