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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. 3.1.2The 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 £2700 on heating and insulation improvements, or up to £4000 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 twelve-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.
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