The government wants to raise the minimum energy efficiency standards to EPC Band C by 2028 in order to improve the overall energy performance of the private rented sector in England and Wales. UK housing stock is generally older than in the rest of Europe, according to the consultation document, and “the potential for improvement in the energy performance is considerable”. Privately rented properties, which make up 20% of the housing stock, are among the least energy efficient, “costing over £6bn in energy bills in 2018 and producing GHG emissions of around 11 megatonnes of carbon dioxide equivalent a year”.
Improving the energy performance of these homes is therefore a vital part of the government’s strategy to meet its greenhouse gas emissions target of net zero by 2050. The government is proposing a phased introduction for the new standards in addition to increasing the maximum investment amount and introducing a ‘fabric first’ approach to energy performance improvements. The consultation on the proposals will be running until 30 December 2020.
The core proposal is raising the minimum energy efficiency standards for privately rented properties to EPC Band C. These bands are based on the total annual cost of energy to heat and light a property, running from A to B, with properties rated A being the most energy efficient. Under the current regulations, the minimum energy efficiency rating for privately rented properties is EPC Band E. There are currently 3.2 million PRS properties in England and Wales with an EPC rating of D or below.
The government is proposing using a phased introduction of the new standards, which means that they would apply to new tenancies from 1 April 2025 and all tenancies by 1 April 2028. This would limit disruption to landlords and tenants, allow more time for landlords to plan and save for improvements, and encourage a “whole house” approach to improvements.
Under the current regulations, landlords of properties in EPC Band F or G are required to self-fund energy efficiency improvements, as recommended on the EPC, up to a cap of £3,500. There are some third-party funding options available. However, the consultation document notes that “improving PRS properties to EPC Band C will require greater investment”, so the Government wants to increase the cap to £10,000.
Government modelling indicates that, on average, most landlords would need to spend £4,700 to bring their properties up to EPC Band C. Homeowners and landlords will also be able to apply for vouchers from the Green Homes Grant scheme to fund at least two-thirds of the cost of hiring tradespeople to upgrade the energy performance of their homes up to a maximum of £5,000 and “landlords are encouraged to make use of this scheme” when it launches in September.
A “fabric first” approach to energy efficiency prioritises improving the fabric efficiency of a building - for example, its insulation - before making improvements to its heat and electricity generation. In addition to cost-effectiveness, a fabric first approach is used to inform recommendations for improvements listed on an EPC. This means that improvements are listed in the following order:
2. heating and hot water
3. windows and doors upgrades
4. electricity generation measures.
In practice, however, landlords can make the recommended improvements in any order, as long as they are complying with the recommendations. The Government is considering ways in which to encourage landlords to take a fabric first approach, including whether or not this should be a requirement under the regulations.
The government is seeking views on these proposals through an online survey, which will be open until 30 December 2020. You can also email PRStrajectoryConsultation@beis.gov.uk to have your say.
This article is intended as a guide only. For more information, see “Improving the energy performance of privately rented homes: consultation”.
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