Sean Hooker, Head of the Property Redress Scheme, shares what the scrapped EPC plans really mean for the lettings industry - and the government.
The party conference season is in full swing and with a general election pending the whole country will be scrutinising the proceedings with more than the usual interest. Housing policy will be front and foremost as a key policy area in the coming election and what the parties include in their manifestos will be a major determinant on how people cast their votes next time.
Having scoured the agendas of the big two, I have not seen any details of policy commitments that will be included in their manifestos. Even the party faithful will have to wait for their leadership to inform them of what their big ideas are from the conference stage.
However, the Prime Minister also markedly kicked off a debate a few weeks back, by scrapping practically all the targets his predecessors set to drive the country towards net zero by the close of the decade.
The announcement on scrapping the introduction of minimum energy efficiency standards based on an EPC of C, was generally welcomed by those in the private rental sector - but there was also anger.
The argument for delaying energy efficiency upgrades
The industry representatives had long argued that the lack of details, support, and commitment from the government in helping landlords and their agents deliver the policy was hindering the roll out of the programme.
They pointed to the overdue review of EPCs, the failed Green Homes Grant, the shortages of qualified and skilled professionals to undertake the work, coupled with massive inflation in materials.
The context of the U-turn
This meant the delivery of the project within the timescales would be unachievable and create a crisis that could lead to unacceptable cost burdens on landlords.
This would all lead to unaffordable rent increases being imposed on tenants or the vast numbers of properties disappearing from the rental market. This was why it looked likely the implementation would be delayed and the parameters reset.
Instead, the decision was to dump the policy entirely and admit the whole thing was just too difficult.
Good landlords bear the brunt of the backtrack
Of course, this has taken the pressure off the landlords whose properties barely scrape past the current low threshold - but many other landlords had either upgraded their properties or were planning to do so.
These landlords are now looking at themselves and saying why did they bother. Once again, the good landlord has been penalised and the worst escape.
This is clearly not a very good message and will further erode the trust the sector has in the government. Why was a delay in the programme not put forward as expected or even an interim measure of a D rating?
The more sceptical amongst the population will no doubt see this as just political expediency.
The government can avoid missing targets - because it has none set
By making this total U-turn, the government can distance itself from the policy and how it planned to deliver it. They did not have to consider the financial support they would have had to offer to help the sector deliver.
They do not have to think of how it can be enforced and policed. They do not have to worry about failing the targets they realised they can't. And they think they can win brownie points with renters, who face rent rises and property shortages that the measures were compounding.
In reality, those renters will see whatever savings they make evaporate through their poorly insulated roof or face hypothermia turning off their heating to save on their escalating fuel bills.
It instead becomes the opposition's problem, as they now have to either reinstate the targets or come up with their own ones. Actually, it's very clever really.
The market is innovating to offer green options
This has, however, caused even more uncertainty and insecurity in the market. Fuel poverty is growing and one tried and tested way of solving this is energy efficiency.
Homes that meet high standards save energy costs as well as safeguard the health and welfare of those who live in them.
It has therefore been the mortgage lenders, and even insurers, who have been looking at incentives for landlords with higher EPC standards.
Green mortgages are in their infancy but the market was innovating and incentivising landlords to invest in upgrading their properties.
The market may well continue to deliver these products; there is clear evidence that consumers want greener homes and could be prepared to pay more to rent or buy.
Technology will help to lower insurance costs
Investment in technology to help energy efficiency will also mean lower insurance premiums, as anything that monitors a home helps lower the risk of things going wrong.
Many homes now can control things like temperature and energy usage remotely or automatically. Investment in this should be high on the agenda.
Currently these sorts of measures are not fully considered by the EPC and MEES system but maybe this is the time for them to do so.
My colleague, Paul Shamplina, is engaging in a campaign to help the roll out of smart meters into rental properties. Myself, Julie Ford and Kate Faulkner were involved in the establishment of Smart Meter Awareness Week. The technology is improving and this must be the way forward.
Could energy efficiency be regulated through rental reform?
I am also now concerned how this change will affect the proposed changes in the renters' reform legislation (which Michael Gove has reassured everyone will back on track once Parliament returns).
Large parts of the bill are dependent on property standards and these are being supported by a portal and ombudsman to ensure property quality is maintained.
One of the key measures is intended to be a home which is adequately heated and insulated to meet the criteria.
It could be argued that a comprehensive review of the standards in rental homes could be an alternative way of ensuring landlords invest in their properties to ensure they are warm and safe.
The hardware in the house has to be adequate, however it has to deliver the savings to the tenant so they are confident enough to heat the home to the safe level.
Energy efficiency has to be key to this and if an EPC of E is not sufficient to do this then we have serious problems.
Again, the HHSRS is under review and if and when the recommendations are implemented the measures of what constitutes a reasonably heated home are strengthened then landlords could face action against them.
The industry will lack motivation to change
The whole thing will come down to enforcement and a joined-up approach between trading standards and environmental health and housing teams will be needed.
Ultimately, the situation we find ourselves in is not sustainable, if you scrap something, you need to have something in place that is better to replace it. The problem is that until this is in place the uncertainty will remain for the sector and it will be unable to plan and unable to adapt.
Yes, unachievable targets can damage the aspirations you have and demotivate and encourage complacency. However, having no targets at all and setting ambitious expectations, will not motivate or prioritise a sector to change.
It also sends out the wrong message as the Liberal Democrat leadership found, when it proposed scrapping national house building targets at its conference.
This was opposed by the members who promptly amended their policy to reinstate a national target as difficult as it may be to achieve, it focuses the mind and keeps your nose to the grindstone.
We are facing an uncertain future and the need for clear leadership. As I pointed out in my blog last month, the sector has to adapt as best as it can. However, as Goodlord and Vouch's State of the Lettings Industry Report shows, the confidence of the sector is low and, in the absence of a plan, desperation can set in.
Hopefully we will, by the end of the month, have seen what the political parties’ aspirations are, and this will be tested both in Parliament and the ballot box over the next crucial months and the following year.
