In this feature, Jonathan Daines looks at how landlords can do their bit to make the rental market greener.
Global leaders have recently been gathered at COP27 in Sharm el-Sheikh to discuss tackling climate change. Adaption and resilience, capacity-building, climate finance, climate technology and more has been debated in depth, in pursuit of a more sustainable future.
But it’s not just world leaders who can make a difference. Every single landlord in the UK has the chance to make their rental properties greener. Here in the UK, work on this is focused on improving EPC ratings, largely due to the requirement that all new tenancies will need an EPC rating of ‘C’ or above by 2025.
Given the average EPC rating in England and Wales was ‘D’ in 2020, and that 16.8 million homes have an EPC rating below ‘C’, we collectively have a long way to go. While I endorse the sentiment, I question whether these targets are grounded in reality.
At present, 53% of homeowners report that they could not afford to retrofit their home (at an average cost of £10,000), according to research by Santander. The research also shows that 77% of brokers would be highly supportive of landlords being able to access grants to make energy efficiency-related home improvements. While there are some financial incentives available to landlords, they are insufficient to cover the total cost of retrofitting, and the cost-of-living crisis certainly isn’t helping.
It’s a perfect storm. The private rented sector (and wider housing stock) is old and needs upgrading to be considered kinder to the environment. That carries a financial cost that landlords and other homeowners are simply unable to bear. Property owners need understanding and support from the government, not them scrapping the Green Homes Grant or this week's Capital Gains Tax hike in the Autumn Statement.
According to the Energy Efficiency Investment Index published by Kamma, the total investment required to bring the national average rating to EPC ‘C’ will cost homeowners and the government up to £48.3 billion.
Under the current rules, any properties with an EPC rating below ‘E’ have an improvement cost cap of £3,500. However, this threshold is set to increase to £10,000 under the proposed changes. The government estimates the average improvement cost to reach an EPC C rating is around £4,700.
Most landlords want to increase efficiency, while doing the right thing for the planet, but if they lack the financial resources, what are they supposed to do?
Some landlords will have no choice but to increase rents to pay for the required changes, adding more financial strain for tenants already suffering through the cost-of-living crisis.
Additionally, the government’s proposed changes seem to completely disregard the logistics of making energy improvements to rentals in apartment blocks. Many landlords own a single leasehold in a building of owner-occupied flats or other rentals, where retrofitting measures are extremely difficult. The more invasive recommended measures, such as external wall insulation and floor insulation are both highly impractical and disruptive for renters.
Given the scale of what’s required, some landlords will be forced to sell up and walk away from the private rented sector, further reducing stock levels and creating more competition amongst renters.
To make matters worse, the scale and cost of EPC compliance may ironically lead to an increase in the number of rogue landlords, opting to avoid advertising portals and registered agents to bypass the regulations.
None of these outcomes are ideal but this is where the current legislation and lack of funding is leading the sector: higher rents, fewer rental properties and more rogue landlords.
Of course, this doesn’t even touch on the whole debate about whether EPCs are actually fit for purpose.
This is not to say that there aren’t quick wins available when it comes to making rental homes more energy efficient. Simply adding an insulation jacket to a hot water cylinder can reduce heat loss by 75% and carbon dioxide emissions by up to 530g, according to Love Energy Savings. Basic cylinder insulation jackets cost from around £22.
Meanwhile, data from Kamma indicates that simple improvements, such as switching to low energy light, could save up to 3.1 million tonnes for emissions per year. Nearly 11 million households are yet to switch their lighting fixtures to energy efficient lightbulbs, despite a relatively low cost of between £15 and £400 per modification.
Yes, landlords are facing some major expenses when it comes to retrofitting properties to achieve a ‘C’ EPC rating by 2025, but there are also cost-effective measures that many could implement immediately to make a significant difference.
*Jonathan Daines is founder and CEO of lettingaproperty.com