Towards zero-carbon homes
On 30 September, the UK government opened a consultation on proposals to strengthen energy regulations aimed at speeding up the retrofitting of privately rented homes in England and Wales. They propose that every one of the approximately five million privately rented dwellings should be required to meet an enhanced minimum energy efficiency standard, as measured by an Energy Performance Certificate of Grade C, at the latest by 2028, with an earlier date of 2025 for all new lettings. This compares with the current, much less stringent, E grade introduced in 2018.
A valid certificate has to be produced on each sale or letting of a property that falls ‘in scope’. Set against the UK average Grade D certificate, the improvement investment required, which has been costed at an average of £4,400 per dwelling, is large, leading to well-founded concerns that this will be beyond the pocket of many small landlords.
And herein lies the issue. The rented stock which will be most hit by this regulation tends to be older, less valuable and sits within the portfolios of those investors who own five or fewer properties; larger investors, who make up only 17% of investors, tend to own newer, often purpose-built flats and houses which are far less likely to fail the new test.
The intention is admirable – and the need to take the action is urgent as the science behind the climate emergency becomes stronger and more evident. Additionally, more efficient homes are warmer, healthier and cheaper to run: all factors that are highly desirable for tenants. But, will landlords have the financial muscle to pay or will they simply seek vacant possession and sell off the homes – unless there is a proven rental or capital dividend? This is recognised by the government, which is proposing a cap of £10,000 maximum spend requirement before exemption may be possible. But even the estimated average cost of £4,400 may be too much for many.
To fill the gap, many landlords are likely to make use of the Green Voucher scheme (not currently available in Wales) but this is time limited, so taking action now may be advisable. However, the good news is that many banks and other schemes (the Coalition for the Energy Efficiency of Buildings (CEEB) is working with a wide range of industry partners to develop innovative ways to develop funding for homes retrofits) including the now privately administered Green Deal will, it is hoped, be able to fill the funding gap - and at currently historically low rates.
So, whilst no doubt there will be those who decide that being a private landlord may not be for them, the proposed move is both sensible and probably inevitable – but it should be regarded only as a stepping stone along the decarbonisation route. However, what will be required is support for those tenants who might find the supply of affordable, though admittedly not high standard, homes decreasing; for them financial help to rent a better quality, if more expensive, home will be needed.
To return to the issue of EPCs themselves, it has long been recognised among technical circles that the current method of assessment does not necessarily reward what in the future may be the most effective energy supply, namely electricity. Hopefully, this will change as the grid becomes less dependent on fossil fuels and such change is built into the EPC assessment process. Just how long this might take is uncertain, but the announcement by the Prime Minister of increasing investment in wind energy has led to a realistic prospect of a fossil free electricity grid by 2030 or shortly thereafter.
No doubt the path to zero-carbon won’t be easy, as the consultation points out, but for a safer climate, it must be worth it – as long as the poor and disadvantaged are not left stranded along the way.
Sarah Sayce is Professor of Sustainable Real Estate at Henley Business School, University of Reading and member of the Green Finance Institute’s Coalition for the Energy Efficiency of Buildings (CEEB).