How the energy crisis is still affecting lettings
Rik Smith, Director of Tenancy Services at Goodlord, shares his expert insights on what the energy announcements in the Spring Budget 2023 will mean for lettings in the short and medium term.
In the Spring Budget 2023, there was little announced on the topic of renting and housing in general. However, there were a few measures that will have an impact on energy bills for both tenants and businesses, as well as a steer on how the government aims to create more stability in the supply and demand for energy in the future. So, here's your energy crisis lettings update.
What's changed for the Energy Price Guarantee?
The government has agreed to continue subsidising 27 million households across the country, for another three months, under the Energy Price Guarantee.
Bills were expected to go up from £2,500 pounds to nearly £3,000 on average per household per year in April - but this will continue at £2,500 until the end of June 2023.
What extra support did the government announce for energy bills?
Those on prepayment meter will soon see their energy prices drop. This therefore affects those who have to top up their energy with a key or a card - or even via an app - before they use their energy.
They previously have had to pay a little bit extra because it's more expensive to service these meters and to fund the mechanism of getting them topped up. Now, prepayment customers will see their energy bills go down by £45 a year.
That's a modest amount, but a welcome one for anyone who is paying more than those paying by direct debit. How long that cost parity will remain is to be confirmed.
What will happen to energy bills as we head into the summer?
As the summer approaches, gas bills should effectively be falling as we use less energy - not because the price changes, but because we just use less when it's warmer.
The expectation is that the energy price guarantee will fall away, and we'll move back to the price cap mechanism. Predictions suggest that energy bills will sit at around £2,100 on average at that stage.
In real terms, however, consumers will not see much of a difference in price. The energy price guarantee limits bills to around £2,500 - and offered everyone a £400 grant too - dropping those costs to £2,100.
When energy prices drop to £2,100, with no interference from the price guarantee, consumers will therefore continue to pay £2,100 on average.
When will it be practical to switch energy suppliers to save again?
This will mark the return of the competitive energy market - but it's likely that we're still quite a few months off. It could be in the summer or into the autumn that it will be possible to switch to reduce your bills by accessing a cheaper price.
What can landlords do to plan for future fluctuations to energy prices?
If your landlords are paying the energy bills for your tenants under a bills inclusive renting arrangement, make sure that you're paying by direct debit.
However, to protect against future price hikes - and to reduce bills overall - insulating properties, double glazing, or even triple glazing is a great way to go. This will also help you meet the expected increased Minimum Energy Efficiency Requirements of an EPC level C from 2025 on new tenancies.
That can not only make sure that tenants have nice warm homes - but also nice healthy homes with the appropriate level of humidity too. So, boosting your property's energy efficiency has multiple benefits.
What else has the government announced to help ensure supply?
A new energy efficiency task force will take on the aim of reducing the UK's energy demand by 15% by 2030, compared to energy use levels from 2021.
That reduction will cover households, businesses - the whole of the UK. They'll approach this methodically, taking an informed, considered view and inviting industry experts.
However, this won't solve our energy security needs for next winter. That will depend upon the international energy markets, and will therefore influenced by what we and other countries are doing to reduce our demand for that gas, in the short and medium term.