Memorandum from the Energy Saving Trust (BDH 33)

Thank you for the opportunity to give evidence to the Committee as part of your inquiry into the above topic. I attach the Energy Saving Trust's response and as requested include a summary response in this letter.

The Energy Saving Trust is one of the UK's leading organisations set up to tackle climate change. We aim to cut carbon emissions by promoting the sustainable and efficient use of energy, water conservation and waste reduction. We are an impartial, non-profit making organisation that acts as a bridge between government, consumers, trade, businesses, local authorities and the energy market. We provide impartial information and advice and have a network of local advice centres in the UK specifically designed to help consumers take action to save energy.

This response comes from the Energy Saving Trust but does not necessarily reflect the views of our members.

Response Summary

Should minimum acceptable social housing standards be amended to take account of environmental standards, fuel poverty and the estate?

A more ambitious minimum energy efficiency standard for social housing needs to be put in place. Such a target is essential to ensure social housing delivers against the government's 2050 targets for carbon reduction and 2016 target for elimination of fuel poverty.

Making a more ambitious target viable for landlords should involve enabling landlords to use rent and service charges more flexibly to pay for energy efficiency improvements. Specifically it should be possible to charge additional service charges to non-vulnerable tenants who have benefited from improvements and have reduced fuel bills.

What lessons can be learned from the Decent Homes programme and equivalents in Scotland, Wales and Northern Ireland?

The Decent Homes programme has worked - as a result of the programme, social housing is now the most energy efficient part of our housing stock. But we need to go much further in order to address fuel poverty and carbon emissions.

The Welsh Housing Quality Standard incorporates an energy standard of SAP 65. Such a standard should be the minimum considered for England.

How should the Decent Homes target for private sector homes occupied by vulnerable people be taken forward?

The private rented sector has the highest proportion of non-decent cold homes, yet government energy efficiency programmes are largely failing to reach this sector. We need better enforcement of environmental health regulation, a rethink of incentives for this sector, and a clear indication to private landlords that government will consider specific future legislation to force action.

In Scotland we would like to highlight a new joined up approach to tackling fuel poverty in the homes of vulnerable people in the private sector. Alongside measures to improve insulation and heating of vulnerable people's homes, the Scottish Energy Assistance Package gives advice on benefits and tax credits and expert energy advice. A similar joined approach in England would do much to ensure improvements the fabric of homes really deliver in terms of taking vulnerable people out of fuel poverty.

Are adequate arrangements in place for the future regulation of minimum acceptable housing standards?

The Decent Homes Standard states that the minimum acceptable standard for thermal comfort is based on the presence of a Category 1 Environmental Health hazard for cold or damp. But there is a lack of guidance about what is a Category 1 hazard for cold. We suggest there is a simple answer here: government should give a clear statement that a home should be defined as having a Category 1 hazard for cold if it rates an F or G on an Energy Performance Certificate.

1. Response Summary

1.1. Should minimum acceptable social housing standards be amended to take account of environmental standards, fuel poverty and the estate?

1.2. What lessons can be learned from the Decent Homes programme and equivalents in Scotland, Wales and Northern Ireland?

The Welsh Housing Quality Standard incorporates an energy efficiency standard of SAP 65[1]. Such a standard should be the minimum considered for England.

1.3. How should the Decent Homes target for private sector homes occupied by vulnerable people be taken forward?

In Scotland we would like to highlight a new joined up approach to tackling fuel poverty in the homes of vulnerable people in the private sector. Alongside measures to improve insulation and heating of homes, the Scottish Energy Assistance Package gives vulnerable people advice on benefits and tax credits and expert energy advice. A similar joined approach in England would do much to ensure improvements the fabric of homes really deliver in terms of taking vulnerable people out of fuel poverty.

1.4. Are adequate arrangements in place for the future regulation of minimum acceptable housing standards?

The Decent Homes Standard states that the minimum acceptable standard for thermal comfort is based on the presence of a Category 1 Environmental Health hazard for cold or damp. But there is a lack of guidance about how to assess for Category 1 hazards for cold. We suggest there is a simple answer here: government should give a clear statement that a home should be defined as having a Category 1 hazard for cold if it rates an F or G on an Energy Performance Certificate.

2. A Higher Minimum Energy Efficiency Standard for Social Housing

A higher energy efficiency standard for social housing is necessary because:

· Across the rented sector, increases in energy efficiency do not tend to be reflected in property capital value or rentability^{^[2]} . Tenants are also unlikely to prioritise action on energy efficiency over more visible home improvements, such as a new kitchen. With no "pull" for higher energy efficiency standards for financial or tenant demand reasons, regulation needs to be used to ensure landlords act. And action is essential because:

· The government has committed to eliminating fuel poverty by 2016. With a long term trend of rising fuel prices (due to diminishing oil and gas reserves and the costs of decarbonising supply), energy efficient homes are essential to eliminate fuel poverty. But even the most conservative estimates state that homes that have a SAP rating of below 65[3] cannot protect poorer tenants from fuel poverty, and some have argued that SAP 81[4] is a better target for "fuel poverty-proofing" homes. The average social sector home in England has a SAP rating of 57.8[5].

· Twenty-seven percent of the UK's carbon emissions come from homes. The government has stated that by 2015 all suitable homes will have full loft and cavity wall insulation. By 2020 1.8million homes a year will have major energy saving upgrades. By 2050 emissions from homes will have to be virtually zero, within a wider all-sector 80% target. Continual improvement in home energy standards is essential if we are going to hit these very ambitious targets.

2.1. Paying for higher standards of energy efficiency

With the energy suppliers' Carbon Emissions Reduction Target (CERT) programmes from which they have accessed extensive funding, social landlords have proved themselves well able to benefit from funding schemes for energy efficiency improvements. Social landlords have also been identified as likely big winners of the new Community Energy Saving Programme and the planned Feed in Tariff for renewable energy.

Against this background, we believe a more ambitious Decent Homes energy efficiency standard is viable. However, we think there needs to be more flexibility in financing arrangements for social landlords who want to deliver energy efficiency improvements for their tenants.

The Government have announced a Pay As You Save (PAYS) scheme for home energy efficiency improvements which the Energy Saving Trust is piloting. For owner-occupiers, the idea behind PAYS is that home owner is able to pay back the cost of a loan for energy efficiency improvements because of the savings they are making on their fuel bill.

Schemes to pay for energy efficiency improvements in the rented sector could work in a similar way: landlords would make energy efficiency improvements and then charge part or all of the costs back to non-vulnerable tenants as increased rent or service charge. Critically, the aim would be that the tenant should never pay more in increased service charge than they save on their fuel bill.

However, government restrictions on rises to social landlords rent and service charges mean that we are not yet clear that such a scheme is possible in the social rented sector. We urge government to ensure that social landlords can raise service charges for non-vulnerable tenants to cover some of the costs of energy saving improvements, where this is balanced through savings on fuel bills.

3. Private Sector Homes

3.1. A joined-up approach to tackling private sector fuel poverty

Making improvements to the thermal comfort by tackling the fabric of homes can still leave many people in fuel poverty. Fuel poverty is a result of low incomes, low levels of energy efficiency and high fuel bills. The most effective programmes address all three of these factors.

A new scheme in Scotland, being delivered for the Scottish Government by the Energy Saving Trust, shows how this can be achieved. The Energy Assistance Package brings together the hard measures and the advice, with the aim of reaching more people and providing a wider range of support. The package has four stages:

· Stage 1: offers free expert energy advice to anyone who phones the Energy Saving Scotland Advice Centre

· Stage 2: involves benefit / tax credit checks & advice on social tariffs to those likely to benefit

· Stage 3: provides a package of standard insulation measures to private sector older households and those on one of a range of benefits through the energy companies' CERT schemes.

· Stage 4: gives bespoke energy efficiency measures (which may include central heating systems, new boilers, draught proofing, air source heat pumps and solid wall insulation) for eligible groups who live in homes in the private sector.

3.2. Addressing private rented homes

The private rented sector has the highest levels of non-Decent cold homes, yet government energy efficiency programmes are largely failing to reach this sector. Some of the issues are:

· Landlords aren't interested in making energy efficiency improvements when they don't lead to increased capital or rental values and it's their tenants - not them - who benefit in terms of reduced bills.

· It's hard to reach landlords and most private sector landlords own only one or two properties. It's for this reason that the CERT programme has not significantly benefited the sector - energy suppliers can't get to the landlords to market their offers.

· Private rented homes tend to be older homes that are hard to improve.

· There has been a lack of enforcement of environmental health legislation relating to Category 1 cold (and therefore non-Decent) private rented sector homes. This is even the case where landlords have refused free energy efficiency improvements under the Warm Front programme[6].

Against this background we believe the following needs to happen:

· Additional, well promoted incentives for private landlords to act. The Landlords Energy Saving Allowance (LESA) needs to be extended, and HMT/HMRC need to tell landlords about it. There has been virtually no promotion of this allowance, despite the fact that in the 2006 budget the Chancellor made a specific commitment to promote LESA.

· The planned landlords register will be key to communicating with landlords about energy efficiency. The Energy Saving Trust are seeking access to the register and to Energy Performance Certificate data so that we can target advice about energy savings to landlords.

· A focus on promoting Energy Performance Certificates (EPCs) in this sector. We believe EPCs could have a real impact in driving demand for more energy efficient rented properties - particularly by making people aware of the F&G rated homes that are probably non-Decent. But anecdotal evidence[7] suggests landlords compliance with the requirements for Energy Performance Certificates is almost non-existent.
CLG needs to focus on ensuring landlords have an EPC for their property, and that they show it to the tenant at the right time. They also need to ensure that EPC ratings appear when homes are advertised on rental websites - currently this is only required for home sales.

· A focus on ensuring local authorities fulfil their duties under the 2004 Housing Act to monitor the condition of housing in their area to identify Category 1 hazards. The Energy Saving Trust could work with CLG and local authorities, using EPC and other data, to identify "cold spots" - areas of towns with high concentrations of non-decent Cold homes. Other action needs to focus on ensuring that all landlords who refuse Warm Front grants are investigated by environmental health officers.

· Many landlords do own old properties that are expensive to make decent. We need to focus local authority housing improvement grants on these older, principally larger and solid walled homes.

3.3. New Regulation

The Energy Saving Trust are suggesting that government give a clear statement that it will become illegal to sell or rent most F or G rated homes after 2015. We have carried out research that shows that the large majority of such homes can be improved relatively cheaply: 81% of homes can be brought out of the F&G banding for less than £3,000 simply by installing loft and cavity wall insulation and/or a modern boiler. Coupled with support for financing, advice and incentives, we think new regulation is important to ensure that all the owners of the least energy efficient homes make improvements where possible.

4. The Housing Health and Safety Rating System and the Definition of a Category 1 Hazard

Research carried out by the Energy Efficiency Partnership for Homes in 2007[8] showed that there was confusion among local authorities about what constitutes a home with a Category 1 cold hazard - and therefore a non-Decent Home. Guidance from LACORS on assessing for excess cold has been long awaited on this issue, but has not yet been published.

Government has in the past indicated a SAP-based score for the Excess Cold criteria at approximately the level of the boundary between an Energy Performance Certificate E and F banding[9], but there has no recent definitive statement on this. We believe a simple statement that a non-Decent Home is one that falls into the F or G banding (which means a SAP rating of below 39) would have significant merits:

· It's easy for everyone to understand, most importantly tenants;

· As far as we can tell, it is close to what government envisions the standard to be;

· Many environmental health officers already use F and G rating as a proxy for Category 1 hazard.

September 2009

[1] The Standard Assessment Procedure (SAP) is the government's methodology for assessing home energy efficiency; it gives homes a rating from 1 (low - very energy inefficient) to 100 (high). Energy Performance Certificates (EPCs) give homes an energy efficient banding from A to G based on their SAP rating.

[2] It is hoped that this is changing with the introduction of Energy Performance Certificates

[3] SAP 65 is the target figure which local authorities are asked to report against in the government's national indicator for action on fuel poverty

[4] Dr Brenda Boardman, Oxford University - see Energy efficiency and equity, a manifesto for DEFRA, http://www.eci.ox.ac.uk/johnandbrenda/symposium/boardman-brenda.pdf

[5] English House Condition Survey 2007 Headline Report, published 2009, CLG, http://www.communities.gov.uk/documents/statistics/pdf/1133548.pdf

[6] See Tackling fuel poverty using the Housing Health and Safety Rating System, Energy Efficiency Partnership for Homes, 2007, http://www.eeph.org.uk/uploads/documents/partnership/EEPH%20HHSRS%20Report2.pdf

[7] We await a forthcoming government evaluation

[8] See Tackling fuel poverty using the Housing Health and Safety Rating System, Energy Efficiency Partnership for Homes, 2007, http://www.eeph.org.uk/uploads/documents/partnership/EEPH%20HHSRS%20Report2.pdf

[9] Decent Homes guidance published in 2006 suggested a SAP 2001 rating of 35 as defining a category 1 hazard, and this is also the rating used to define a Category 1 cold hazard by the 2007 English House Condition Survey. SAP 2001 is now out of date, and CLG have not issued an updated SAP figure.