While some landlords may have breathed a sigh of relief following Prime Minister, Rishi Sunak’s announcement on energy upgrades, I suspect there were others left scratching their heads.
For years, we have heard the Government talk about the urgency of upgrading the UK’s housing stock, particularly in the rental sector. Now, we are being told that – in England at least - net-zero targets can still be met by 2050 without ‘forcing’ households into it.
A delay to the Energy Performance Certificate (EPC) requirements for landlords had been hinted at several times before, so while in some ways the decision was not a huge shock, the absence of any form of timeline, was more unexpected and frankly, disconcerting.
Savvy investors will be all too aware that, despite Sunak’s promises, upgrades will inevitably need to happen at some point if we are to reach net zero.
Own initiatives
We can understand the logic behind the announcement. At a time when available rental properties are already in short supply, it would seem the Government had to find a way to try to prevent landlords from potentially leaving the market to the detriment of renters.
There was also talk of landlords passing on the costs of the EPC upgrades to renters or even the possibility of tenants having to move out for the changes to be carried out.
Of course, the cynic in me might view Sunak’s decision as a clever political move. With a General Election on the horizon, if I did not expect to be in power next year, I might have done the same to force the new Government to declare their own initiatives that those in opposition can disagree with.
Labour has already committed to reintroducing the ban on petrol and diesel cars from 2030 but has not yet revealed its intentions regarding EPCs.
We recently saw Labour - who had just months previously declared they ‘backed the builders, not the blockers’ - vote against the Government's attempt to scrap the ’nutrient neutrality’ rules, which they blame for delaying the construction of 100,000 new homes.
Undoubtedly, Labour will assess public reactions to the EPC announcement and shape its response; with green issues appearing to be an increasingly significant election battleground.
We have seen some of its intentions in the form of its Warm Homes Plan and while one might expect Labour to defend the goal of net-zero emissions, anything could happen.
The question remains regarding just how the UK’s housing stock will be upgraded. The rental sector served as a preliminary stage for the main event - residential properties. While Sunak assures us we will still meet the net-zero targets by 2050, it may not be wise to rely solely on the goodwill of property owners to achieve this.
The green incentives we’ve seen so far to encourage homeowners have not been as effective as the Government had hoped. There seemed to be some confusion about who could get funding and even if you could afford it, the chance that a consumer knew what to do or how to get advice was slim at best. Following Sunak’s announcement, many will now have given up altogether.
Without some pressure to drive these changes, it’s hard to envisage how the housing stock will be upgraded to the necessary level. We have seen deadlines pushed back for other industries, such as electric cars and oil boilers and having some form of plan for EPCs would also be helpful.
It is hoped that over the coming weeks and months, we will gain some clarity on what Sunak really meant. Has the deadline just been pushed back, or has his Government bolted the door on energy upgrade deadlines completely? Given he disbanded the Energy Efficiency Taskforce just days after his announcement, I fear it might be the latter.
End of the line
The task force was set up by the Chancellor, Jeremy Hunt, in March to encourage the uptake of insulation and boiler upgrades during the cost of living crisis.
As unpopular as the EPC requirements were among some landlords, you have to wonder if the position they now find themselves in is equally as frustrating - especially for those who had already carried out the upgrades or had plans underway.
Speaking before the announcement on electric cars, the chair of Ford UK, Lisa Brankin, summed up the three things its business needed from the UK government: “ambition, commitment, and consistency”. And it is the lack of consistency and commitment surrounding EPCs which I fear will continue to cause problems for landlords.
We have seen the National Residential Landlords Association (NRLA) tentatively welcome the decision, insofar as it means landlords will not be required to invest substantial sums during a time of financial difficulty for many. However, they have also called for a ‘clear timescale for change’ as well as a plan for financial support and reform of the tax system to help landlords carry out the upgrades.
I suspect that despite Sunak’s announcement, this is far from the end of the line for EPC upgrades, and if I were a landlord, I wouldn’t be throwing out the energy-saving light bulbs just yet.
References:
https://www.gov.uk/government/speeches/pm-speech-on-net-zero-20-september-2023
https://www.nrla.org.uk/news/Sunak-axes-MEES-plans
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A number of high profile Labour and Lib Dem politicians have already stated that they will be re-starting the Government's Minimum Energy Efficiency Standard for domestic rental units if/when they win the General Election in May (?) next year.
Up until last Wednesday the Conservatives have had a pretty good track record on energy efficiency and had been steadily reducing the stock of the most energy wasteful houses & flats in the PRS. Conservatives bought in the Energy Act in 2011 (outlawing EPC Grade F & G units by 2018), Conservatives bought in the Minimum Energy Efficiency Standard in 2015, energy efficiency was at the heart of their 2019 General Election manifesto, the Conservatives issued the Energy White Paper in 2020 detailing the future MEES trajectory to 2030, and finally the Conservatives started the national Energy Efficiency Taskforce in 2022, packing it with energy experts and commercial brain-power. All of this effort has been working, especially in the commercial landlord sector where landlords have been putting their efforts into making their product better rather than moaning on websites.
Seems strange that Sunak should do a U-turn. Perhaps he sees more votes from the vocal minority of domestic landlords who own energy wasteful units, rather than the 8 million UK families who lived in fuel poverty last winter and will be again this winter.
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