Rishi Sunak appears to have confirmed that the government will scrap its plans to increase Minimum Energy Efficiency Standards for private rented properties.
Following reports that the government was delaying its plans around increasing the required EPC rating to C in private rented properties, Prime Minister Rishi Sunak appears to have confirmed that those plans will now be "scrapped."
Housing Secretary Michael Gove had previously shared in an interview that the government is "asking too much too quickly" of landlords, and says that it should "relax the pace" of the proposals. He attributes this suggestion to the "big capital outlay” that landlords are facing to improve the efficiency of properties.
Here's what you can expect from this article:
- What was proposed for EPC rating requirements?
- What was the proposed new investment cap?
- What is a “fabric first” approach?
- When did the consultation on the proposals close?
- What was included in the EPC plan of action?
- How energy efficient are private rented properties?
- Is the energy efficiency of private rental properties improving?
What was proposed for EPC rating requirements?
The government's core proposal was raising the minimum energy efficiency standards for to EPC band C, improving the energy performance of privately rented homes in England and Wales.
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.
The government previously proposed 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.
However, the government has now withdrawn its plans to force landlords to upgrade the energy efficiency of their properties, instead saying that it will simply "continue to encourage households to do so where they can."
The NRLA has urged caution that these measures may be considered again in the future, particularly if the UK were to see a Labour government in the future.
The NRLA's Deputy Policy Director, Meera Chindooroy, says: "In reality this means there is still no clear plan for the sector, something that will only serve to complicate landlords’ investment decisions.
"Despite the rhetoric this week, Rishi Sunak doesn’t have the last word on this issue. But it’s not yet clear who will."
What was the proposed new investment cap?
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 had planned 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.
What is a “fabric first” approach?
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:
1. Insulation
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.
When did the consultation on the proposals close?
A consultation on the proposals to increase minimum energy efficiency standards ran until 8 January 2021. The proposals are expected to feature in the Minimum Energy Performance of Buildings bill, which is now awaiting its second reading in the House of Lords.
In line with the consultation, the government announced a plan of action for how to improve the use and performance of Energy Performance Certificates (EPCs). This includes updating the Energy Performance of Buildings (England and Wales) Regulations 2012 (EPB Regulations) in 2022.
What was included in the EPC plan of action?
A list of 35 actions were highlighted in total from the EPC consultation launched in July 2018, with three top priorities:
- The system needs to produce "accurate, reliable, and trusted EPCs" so they can be relied on to set up incentives and support the other financial implications of improving energy efficiency in homes
- Consumers need to be engaged and policies created to encourage homes to move to the proposed EPC band C
- Data infrastructure improvements should be made to ensure EPCs can be used in decision making on improving energy efficiency in homes
The action plan shares that a second consultation is being prepared to progress some of the key regulatory actions with amendments to the EPB Regulations in 2022. Topics that will be discussed include:
- Using and accessing data to improve the audit of EPCs
- Considering revising penalty rates, how to ensure compliance, and enforcement
- Improving oversight and accountability across the EPC system
How energy efficient are private rented properties?
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”.
Is the energy efficiency of private rental properties improving?
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. More energy efficient homes will also help mitigate against the rising cost of energy during the energy crisis.
The English Housing Survey 2019-2020 shows evidence that the sector is already moving in the right direction - the number of private rented homes in EPC bands A to C in 2019 was up 13 percent versus 2009, with 38 percent of all private rental homes falling into this category.
The Office of National Statistics estimates that it would cost each applicable private rented property £7,646 to move into Band C, in line with the proposals.
This article is intended as a guide only. For more information, see Improving the energy performance of privately rented homes: consultation and Improving Energy Performance Certificates: action plan
