Memorandum submitted by the National Landlords
Association
The National Landlords Association is pleased
to be able to respond to the Communities and Local Government
Select Committee enquiry into the existing Housing Stock and Climate
Change.
The enquiry seeks to examine a number of areas
which are contributory factors to the current situation regarding
energy efficiency in the existing housing stock. The enquiry is
wide ranging and attempts to draw out the issues of key importance
to improving energy efficiency in the existing housing stock.
The NLA recognises that the issues identified for examination
are entirely appropriate to the enquiry. The NLA response necessarily
concentrates on those areas in which the Association has expertise.
1. BACKGROUND:
ABOUT THE
NLA
1.1 The NLA is the largest single landlords
association in the country. It has members right across the United
Kingdom, including five special corporate members, Birmingham
Midshires, Bristol & West, Mortgage Express, Mortgage Trust
and Paragon, and fifty local authorities who are associate members.
1.2 The NLA protects and promotes the interests
of private landlords of residential property and represents their
views to government, local authorities and the media. The NLA
seeks a fair legislative and regulatory environment for the private-rented
sector while aiming to ensure that landlords are aware of their
statutory rights and responsibilities. It campaigns to raise standards
in the private-rented sector whilst fostering a professional and
amicable relationship between landlord and tenant.
1.3 We deplore, and do what we can to dispel,
the notion of the "get-rich-quick" phenomenon of speculative
investment. The NLA believes that residential property investment
is a long-term proposition which must be managed properly and
that private landlords must make themselves aware of the regulatory
and commercial environment in which they operate. We offer our
members the services they need to achieve this via, for example,
our advice line available to members every day of the working
week, and the bi-monthly journal UK Landlord.
The respective roles of residents, homeowners,
landlords, local government, central government and the energy
industry in promoting and delivering greater energy efficiency.
2. THE ROLE
OF THE
PRIVATE RENTED
SECTOR LANDLORD
2.1 The National Landlords Association recognises
the important role the Private Rented Sector has to play in dealing
with the challenges facing us owing to climate change. As a founder
member of the Private Rented Sector Sub-group of the Energy Efficiency
Partnership for Homes, the NLA has played a leading role in publicising
and promoting energy efficiency issues to landlords and informing
policymakers about the challenges facing the private rented sector.
The NLA is also a member of the All Party Parliamentary Climate
Change Group.
2.1.1 We accept that the private rented
sector has been seen as a difficult sector to reach in terms of
promoting energy efficiency measures in homes. For the most part
this has been because the most tangible benefits of energy efficiency—such
as lower energy bills and higher levels of comfort -do not, except
in some multi-occupancy properties, directly affect the landlord,
whilst it is the landlord who has to pay for the improvements.
Moreover, there is limited scope to recover the, sometimes considerable,
costs of improvements via increased rents. The NLA has nevertheless
consistently outlined the benefits to landlords. These include:
2.2 Decrease voids
In areas of low demand, an energy-efficient
property may give an edge over the competition. In areas of high
demand, where there is a more environmentally aware younger professional
tenant market, the same considerations will increasingly apply.
Advertising schemes are already being drawn up by the Energy Savings
Trust and other groups to promote to student communities the existence
of Energy Performance Certificates, with the hope that the message
will be taken on as they leave university and make their first
move—usually into the private rented sector.
2.2.1 Maintaining fabric of the property
It is sometimes overlooked that energy efficiency
improvements will help maintain the fabric of the building. Damp,
mould and frozen pipes are less likely in an energy efficient
property, thus keeping maintenance costs down. The improvements
will also, hopefully, encourage the type of tenant who will appreciate
the improvements and look after the property.
2.2.2 Market advantage
Whilst few tenants currently ask questions about
energy efficiency measures, they do regularly ask about the cost
of heating and lighting. There is an opportunity for the landlord
who has made improvements—who has perhaps supplied energy
efficient light bulbs and appliances—to use this as a market
advantage by pointing out the cost benefits the improvements will
provide.
2.2.3 Boscombe Model Energy Efficiency Scheme
As an example of what can be achieved in promoting
energy efficiency measures, the NLA has been actively promoting
what was achieved under the NLA members should look to what has
been achieved by NLA (Dorset) in The Boscombe Project. The area
houses many of the most vulnerable residents of Bournemouth. In
a partnership between local NLA members, the local Energy Savings
Trust and the local authority, all houses in multiple occupation
(HMOs) in the Boscombe area of Bournemouth were made thermally
efficient.
2.3 As is the case with the owner-occupier
sector, with the exception of some very ecologically motivated
landlords, the decision to make energy efficiency improvements
will inevitably be based on financial considerations.
2.4 Whilst the Decent Homes standard is
not a direct indicator of energy efficiency in a property, it
contains an assessment of thermal comfort. On this basis it shows
that that the private rented sector has been consistently working
to achieve an improvement in standards. The Government's most
recent English Housing Condition Survey 2005 indicates that 59.4%
of the housing stock in the private rented sector now meets the
Decent Homes Standard. This figure has steadily been increasing
over the past few years. The thermal efficiency statistics for
the sector—based on a SAP rating—put the figures for
the private rented sector and the owner-occupied sector at almost
identical levels, at 46.0 and 46.1 respectively.
2.4.1 The findings also indicate that the
number of vulnerable households living in non-decent accommodation
in the private rented sector is higher than in other sectors.
This is a challenge facing the sector and we recognise this. We
feel there are a number of key factors to be considered. The majority
of landlords in the UK do not belong to a landlords association.
Consequently they may have only limited access to useful and authoritative
information and advice on how to set about improving the energy
efficiency of their property. Furthermore, they may not know that
they can obtain information on grants and other incentives to
make energy efficiency improvements. There are also rogue landlords
who may prefer not to become members of an association or make
themselves known to the local authority so as to avoid their responsibilities.
These landlords should be encouraged to improve or else marginalised
from the sector.
3. ROLE OF
TENANTS
3.1 The NLA would welcome an impetus from
the market to make energy efficiency a higher priority than it
currently is. Until now there has not been widespread interest
from tenants calling for investment in energy efficiency measures.
3.1.1 Anecdotal evidence from our members
suggests that the energy efficiency of a property is usually a
long way from being a prime consideration to the average prospective
tenant. If energy efficiency measures are mentioned at all by
the tenant it is usually in the context of asking if the double
glazing keeps the traffic noise out.
3.1.2 The Regulatory Impact Assessment on
HMO Licensing November 2004 shows that:
— 42% of tenants have lived in their
home less than a year, compared with 11% of social tenants and
7% of owner-occupiers;
— 40% of tenants are under 30 (up from
29% in 1994).
3.1.3 The tenants who do not plan to stay
long-term in rented accommodation are less likely to ask their
landlord to make energy efficiency improvements since they do
not have a vested interest in long-term efficiency gains. Younger
tenants tend to be less concerned about thermal efficiency of
properties and more concerned with other aspects of the accommodation,
such as proximity to work, friends and public transport.
3.1.4 We recognise that there may also be
some fears from a small minority of tenants over retaliatory eviction
if they press their landlord for energy-efficiency improvements
to the property. Whilst there are rogue operators in the sector
who may act in this manner (the NLA does not recognise them as
"landlords"), the perception of this problem may be
more of a barrier to requests for improvements than the actual
extent of the problem.
4. THE SIGNIFICANCE
OF EXISTING
HOUSING COMPARED
TO NEW
BUILD AND
THE DIFFERENT
LEVELS OF
PERFORMANCE EACH
DISPLAY
4.1 It is difficult to obtain detailed information
on the sector. However, we would invite the Committee's attention
to the following, taken from the Regulatory Impact Assessment:
— Much of the stock is old—In
2001 43% of properties were pre-1919 and 59% pre-1944;
— 30% of landlords rent only one property.
4.1.1 It is clear from this that the practical
challenges facing the sector are considerable. The age of the
stock alone multiplies the difficulties and costs of upgrading
the properties. Two specific points can be made: the vast majority
of pre-1919 housing will have solid walls and therefore not be
capable of being improved by cavity wall insulation. And secondly,
the sector has a disproportionately high percentage of flats,
most of which are ineligible for loft insulation. The older the
property the more often repairs are required, and the more costly
any potential energy efficiency improvements may be.
4.1.2 The third of the sector that owns
only one let property presents yet more potential challenges.
They are not able to introduce measures in as cost effective a
way as owners of multiple properties and may be disinclined to
do so. Moreover they are possibly less likely to join a landlords
association and do not have the ready access to advice on grants,
fiscal incentives and advice on best practice that membership
of the better-founded landlords associations offers.
4.1.3 Despite these difficulties the sector
has been improving in recent years as is shown in the decent homes
figures for the private rented sector.
5. ENERGY PERFORMANCE
CERTIFICATES
5.1 Two key aims of the Directive are to
encourage prudent use of natural resources and to improve energy
efficiency. The mechanism chosen to help achieve this is that
all properties—owner occupied and rented—should make
a valid Energy Performance Certificate (EPC) available to the
prospective buyer or tenant before the property is sold or let.
5.1.2 The NLA has been involved in the consultation
process held by DCLG for the design and information content of
the EPCs. The NLA believes that the EPC will be a driver for improvements
in the sector when they are introduced in Autumn 2008. The NLA
has consistently stated that it would welcome market-driven improvements
to energy efficiency of properties; however, we would be concerned
if the measures were made mandatory. Such a step would not address
the worst properties run by the rogue operators who may currently
operate without the knowledge of the authorities. Moreover it
would lessen acceptance by the majority of landlords who comply
with current legislation and are already feeling the weight of
existing levels of regulation.
5.1.3 We strongly urge that the recommendations
contained in the EPC should remain recommendations and not become
requirements. Were the certificates to have elements of compulsion
acceptance of the policy by the sector that the NLA has been working
hard to achieve may be jeopardised. The EPC has been presented
to landlords as an opportunity to market their properties rather
than as yet another piece of legislation imposed on landlords.
5.1.2 The format of the EPCs in Scotland
and Northern Ireland is still unclear. The NLA has members across
the United Kingdom. We recommend consistency in the implementation
of the directive across the devolved assemblies to avoid confusion
over differing styles of presentation, information and requirements.
6. WE WOULD
ALSO LIKE
TO HIGHLIGHT
THE EXISTING
MECHANISMS WHICH
COULD BE
USED TO
IMPROVE ENERGY
EFFICIENCY IN
THE PRS
6.1 Building Regulations. Part L 2006
Part L regulations refer to the energy efficiency
of a building and apply to new buildings or alterations to existing
buildings of any sort—domestic, industrial or commercial.
Under the regulations the Dwelling CO2 Emission Rate
must be lower than the Target CO2 Emission Rate. This
regulation will apply if landlords are making material alterations
to the interior or exterior of the building. CLG suggests that
changing the windows in a property may trigger these regulations.
6.1.1 Housing Health and Safety Rating System
(HHSRS)
The HHSRS has replaced the old fitness standard
with a risk assessment procedure. Excessive, cold and damp, and
mould growth, are two of the hazards which HHSRS will consider.
This will be of particular interest to landlords in parts of the
country where the climate is colder and wetter, and energy efficiency
improvements may improve the rating.
6.1.2 Local authorities already have powers
to require energy efficiency improvements. The NLA would not support
the imposition of more regulation on the private rented sector,
which is trying to cope with the wide-ranging changes recently
introduced by the Housing Act 2004 and tenancy deposit protection.
7. CURRENT ASSISTANCE
FOR LANDLORDS
7.1 Green Landlord Scheme
Many NLA members have heard of the Green landlords
Scheme as it has received a relatively large amount of publicity.
It was originally mentioned in the 2004 budget that the Chancellor
would develop incentives for landlords to be "green".
Unfortunately there is very little to show for the scheme itself
three years down the line, apart from welcome developments on
Landlords' Energy Savings Allowance. The NLA believes that government
should do more to develop a package of measures, including fiscal
incentives for energy efficiency improvements.
7.1.1 Landlords Energy Savings Allowance (LESA)
The allowance has provided landlords with a
deduction on income tax to a maximum of £1,500 when they
install loft or cavity wall insulation in their let property.
The NLA welcomed the extension of the LESA in this year's budget,
which enabled landlords to also claim the allowance for installing
draught-proofing and insulating hot-water systems. This is an
attractive tax break for landlords, though we would like to see
it extended to include any energy efficient measures. There is
a danger that if specific types of investment are targeted the
technology may become out of date, resulting in properties not
suitable for existing measures to lose out.
7.1.2 Warm Front
Warm front is a government grant scheme which
provides funds to cover insulation and heating improvements. It
offers up to £2,700 on heating and insulation improvements,
or up to £4,000 to cover oil central heating projects if
they are deemed desirable.
7.1.3 Access to the fund is based on the
tenant's circumstances and the tenant must be in receipt of benefits
to be eligible. The drawbacks to the scheme are that it is the
tenant who must make the application for the fund and not the
landlord. There are practical implications which arise from a
fund which is based on an individual's eligibility, and it can
exclude the most vulnerable. For example, if the tenant is resident
in an HMO the work cannot be carried out on the whole property
just because one eligible tenant is living there. Furthermore,
landlords can be concerned about the contractors used by the local
authorities to carry out improvements. The landlord has no power
over who carries out the work and often has little opportunity
to decide exactly when the work will be done. Moreover the landlord
who agrees to this scheme has also to agree not to increase the
rent for a 12-month period afterwards.
7.1.4 Local Authorities
Many local Authorities run grants for energy
efficiency improvements independently of the schemes above. As
the grants are funded from each local authority's individual budget,
interested landlords are required to contact the local authority
for information on what might be available to them. As yet we
have been unable to obtain authoritative information about the
level of take-up of grants.
8. THE TECHNOLOGIES
AVAILABLE TO
REDUCE EMISSIONS
AND THE
GOVERNMENT'S
ROLE IN
FACILITATING RELEVANT
FURTHER TECHNOLOGICAL
DEVELOPMENT
8.1 The NLA is not expert in the development
and application of new technologies. Nevertheless, it is actively
seeking to assess ways of making energy efficiency products available
to its membership. Retro-fitting in the industry as a response
to the consequences of climate change which are already being
felt needs further examination. The NLA is concerned that, owing
to the structure of the sector described above, the costs of retro-fitting
will be relatively high for private landlords.
8.1.1. The NLA is developing links with
suppliers of energy efficiency products. This has so far focused
on metering systems. Raising tenant awareness of the amounts of
energy used will be attractive to those properties, often multiple
occupancy, where the energy bills are covered by the landlord
as part of the rent.
8.1.2 The NLA has also been examining the
use of water efficiency systems and is discussing possible links
with Waterwise, a not-for-profit NGO seeking to reduce water consumption.
9. THE PROVISION
OF INFORMATION
FOR HOUSEHOLDS
AND PROSPECTIVE
HOUSE BUYERS,
INCLUDING ENERGY
PERFORMANCE CERTIFICATES
9.1 The provision of information to the
private rented sector has been poor. Consequently, knowledge in
the sector of energy efficiency issues has been poorer than that
of the owner-occupier sector. The NLA has developed its energy
efficiency strategy over the past two years and promoted and explained
energy efficiency to our membership. Whilst we have been pleased
with the interest shown, the message is not being sufficiently
reinforced in wider circles.
9.1.2 As outlined in other areas of this
response, much more can and should be done by central and local
government to promote energy efficiency in the private rented
sector. Moreover, by focusing on providing incentives for landlords
letting to housing benefit claimants (a minority), current incentive
schemes have failed to raise the profile of the energy efficiency
beyond a small section of the sector.
10. SUGGESTED
ROUTES FOR
IMPROVEMENT IN
THE SECTOR
10.1 Grants
Grants would be a good way to incentivise the
sector but the grants must be promoted and advertised by central
and local government and possibly through landlords' organisations.
10.1.1 Tax incentives
Tax incentives must be administratively effectively.
Stamp duty reductions or increased tax allowances would need to
be looked at closely and may not the most effective method of
encouraging energy efficiency improvements in the sector. The
focus of fiscal changes in this way should be on the use and supply
of energy.
10.1.2 VAT reduced rate for non-grant schemes
The government should consider extending VAT
reduction for the supply and installation of energy efficient
products or materials to non-grant schemes for landlords employing
contractors. Currently the reduction only applies where the landlord
installs the measure himself. This situation discourages improvements.
Realignment of the taxation system could be
an effective method of addressing the supply and demand of energy.
Dealing effectively with these two issues will, we suggest, have
a positive effect on energy efficiency levels in the sector. We
strongly recommend the government to reform VAT levied on:
— Domestic appliances purchased for
use in let residential property.
— DIY materials purchased and installed
by landlords and homeowners.
— Repair, maintenance and improvement
of domestic properties.
10.1.3 Tenant Education
Responsibility for addressing the problems arising
from climate change should also fall on tenants. In unfurnished
properties in particular the choices a tenant makes on which appliances
to buy and how they are used can have a significant effect on
the consumption of energy in the home. Tenants, and should be
given positive incentives to buy energy efficient products. Tenants'
responsibilities should be advertised by government. Landlords
can recommend suppliers or products, but they should not be required
to insist that a tenant uses or buys certain types of products.
10.1.2 EEC/CERT
Under the Energy Efficiency Commitment (EEC),
electricity and gas suppliers are required to achieve targets
for the promotion of improvements in domestic energy efficiency.
The EEC contributes to the Climate Change Programme by cutting
greenhouse gas emissions. At least 50% of energy savings must
be focused on a priority group of low-income consumers in receipt
of certain benefits and tax credits/pension credit. In this way
it is expected that the EEC will contribute to the eradication
of fuel poverty.
A key challenge is for landlords' representatives
and energy companies to work together to develop packages under
the EEC commitment—and subsequently CERT—to produce
packages that will incentivise the private rented sector. The
NLA is currently in discussions with two large energy suppliers
to develop schemes designed to provide tangible benefits to its
membership. The NLA has been disappointed, however, that more
energy suppliers are not seeking to develop their own packages.
In fairness many suppliers have schemes that will pay the full
costs of improvements in properties with tenants in receipt of
housing benefit. This will improve conditions for some of the
most vulnerable and some of the worst accommodation. From our
conversations with suppliers the uptake of even these free improvements
has been poor. A possible reason for this is a concern that the
energy companies will try to tie the landlord or the property
in question into a business relationship. More needs to be done
by government and the energy companies to fully explain the way
the schemes will work. It is also important to develop packages
that do not seek simply to benefit the most vulnerable but can
be applied to the whole of the sector.
| 
