New Thinking: Turning a First Step into a Journey: Energy Efficiency in the Private Rental Sector

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New Thinking: Turning a First Step into a Journey: Energy Efficiency in the Private Rental Sector

Photo of Tom StewardTurning a First Step into a Journey: Energy Efficiency in the Private Rental Sector

Tom Steward, IGov Team, 17th February 2015

About Tom:

In recent weeks came the final confirmation of another policy designed to help improve efficiency in the private rental sector. Originally provisioned in the 2011 Energy Act, a Government response to consultation sets out that from 2018, all private rental sector properties [1] have to have a minimum standard of EPC rating E. This was coupled with a ruling that from 2016, landlords will be unable to refuse reasonable requests from tenants for the improvement of properties they are renting up to grade E. Both of these measures carry the caveat that they must be achievable (although not necessarily achieved) by means of The Green Deal, i.e. at no cost to the landlord [2]. Regulation on private landlords is a definite step in the right direction, but much must be added to the policy if we want that step to turn into a journey.

The common sense connection between inefficient homes and high energy bills is now very well established, and indeed the Government’s proposed fuel poverty strategy aims to raise all fuel poor homes to EPC band C by 2030 (how feasible such a target will be to actually deliver is a matter for another day). Although recent figures are hard to find, it is clear that targeting the most inefficient rental properties could indeed have significant benefits for the fuel poor: in 2010 DECC estimated that almost half of F&G private rental sector households were fuel poor, and in 2012 the severity of fuel poverty experienced by those in private rental sector F&G properties was approximately 2.5 times worse than those in an E-rated property. However if the government is serious about the new fuel poverty target, there needs to be something in place to build on this foundation; making sure that the private rental sector makes a real contribution to meeting the target.

A policy mechanism to achieve this is not hard to imagine; a simple ratcheting up of minimum standards on private rental properties, set out far in advance, would be an easy way forward. This would offer landlords a clear view ahead of what will be expected of them, giving time to plan expenditure effectively so to keep costs to a minimum. It would also give government some guaranteed wins as far as fuel poverty is concerned. As the proposed strategy highlights, over a third of fuel poor households are in the private rented sector but very few live in a home with an energy rating of C or above. If regulation such as this were supported by competitive financing and easily accessible information, it could make a real difference.

It’s not just about the fuel poor however, it makes sense for the wider economy too. If the retrofit industry can see there will be a steady demand for their products and services going forward they can begin to plan for the long term; taking on staff and apprentices, and investing in skills and infrastructure. It is no secret that businesses like a stable environment in which to invest and operate in, renovating the private rental sector is a perfect opportunity for government to offer some certainty to an industry that felt the sting of changes to the ECO.

This policy is one of a broad array of energy efficiency policies that we have in the place in the UK. These have recently been mapped out in a new IGov working paper, which shows the wide range of policies that exist across sectors and how these vary in terms of their scale of impact. These policies may be considered an outcome of governance structures and whilst such policies are important, they must be taken within the broader context of UK energy policy; other UK policies, regulations and rules frequently serve to increase supply, often of fossil fuels, thereby limiting the overall net benefit in terms of transition to a low carbon economy. Ultimately it is these governance structure that will affect how (and indeed if) this policy is developed.

Although I have concerns around potential reliance by landlords on the Green Deal to meet the obligations, and any policy such must be considered within the broad policy context, it is clear the private rental sector announcement may offer a small ray of hope to a large number of people. However, if we are to build momentum and really start moving forward, policy makers must do much more to light the road ahead.

[1] The private rental sector accounts for approximately 18% of the households in England.

[2] This is based on the assumption that tenants are responsible for paying the energy bill, although there is currently a lack of clarity around how this affects aspects such as the Green Deal Assessment which usually carries an upfront cost.


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