Blog: Energy Efficiency in the private rented sector
As the UK Government hosts the COP26 climate change summit, it has begun to reveal its strategy to transition the UK’s housing stock to become carbon neutral.
In the Heat and Buildings Strategy the government announced grants of £5000 for homeowners and landlords to upgrade to heat pumps – but the total funding equals just 90,000 heat pumps per year. While welcome, this is well short of the estimated 1 million heat pumps needed a year this decade in the UK.
Major strategic decisions on the role of unproven technologies have still to be made; no clarity will come on the role of hydrogen in decarbonising the gas grid until 2026. We also haven’t yet seen the government’s response to the Minimum Energy Efficiency Regulations consultation held earlier this year, which proposed a minimum EPC C rating for new private rented sector tenancies from 2025.
This present lack of clarity may, understandably, cause concern for many landlords.
What measures are needed?
Last week, the think-tank Localis, launched its report Lagging Behind, which highlighted that the relative cost of retrofitting in relation to property value varies significantly across the country.
The report, sponsored by the NRLA and Propertymark, highlighted research that for a property in Kensington and Chelsea, retrofitting a property at an average national cost of £24,000 will represent 1.8% of median property values. In Burnley, where the median house price is under £100,000, this represents nearly 25% of the property’s value.
The report emphasises the importance of mechanisms for local authorities to assume a leading role via localised funding mechanisms. Additionally, in the report, the authors call for local authorities to create independent sub-regional “one stop shops” to assist landlords and to identity suitable methods for retrofit and roll them out at pace. This would allow approaches to skills and supply chain development to better suit local circumstances. Another key recommendation of the report is for central government to establish a localised funding mechanism for retrofit.
What do landlords need to do?
Many are no doubt wondering which type of technology to invest in. Landlords who are in a position to install heat pumps can take advantage of the grants that the government has made available. Many will, however, need to improve the efficiency of their properties before heat pumps will be viable for them. It appears that the government is aware of this and the current grant scheme aims to develop the supply chain for heat pumps to help bring down costs in the future.
Clearly decarbonising heat generation will be a key pillar of this endeavour. But the question is whether this will be down to individual homeowners, or whether the government will decide to decarbonise the grid.
At this stage in decades-long process it seems that government is focused on laying the foundation for the future changes to energy and heat generation. It is important for us all to understand that everyone, landlords and owner occupiers, will have to make significant investments and changes over this period. There is no single solution. It is not a case of just reaching an EPC rating of C. The goal posts will continue to move in the direction of net zero for the foreseeable future.
Whilst we cannot say, at this point, which technological solution will be the right one for everyone – and indeed there is every reason to believe that a wide range of solutions will be needed – what we can say with confidence at this point is that energy efficiency measures will become ever more important.
The NRLA is actively campaigning on this issue and will continue to do so as the climate change conference takes place and the MEES consultation response is received from government.
The NRLA, in partnership with Propertymark is hosting a webinar on 18th November to discuss the transition to net zero and what this means for landlords, where Localis will also talk about the findings of their report. Join us for a lively discussion on the future of energy efficiency in the private rented sector.