Energy and Climate Change CommitteeWritten evidence submitted by the Residential Landlords Association

About the Residential Landlords Association (“RLA”)

1. The Residential Landlords Association (RLA) is a national landlords association operating in England and Wales. We have over 16,000 members. Our members own or control over 150,000 units of accommodation. Primarily our members are landlords in their own right but a number are managing and letting agents, some of whom are also landlords. Our members operate in all sub-sectors of the Private Rented Sector (PRS). Properties are rented out to families, working people, young professionals, the elderly, students and benefit customers.

Introduction

2. This Response concentrates on tracking the progress of the implementation of the Green Deal in the PRS.

3. Landlords in the PRS are, uniquely, to be subject to compulsion as regards improving properties. It is anticipated that from 2018 onwards a property cannot be met unless it meets at least E on an energy performance certificate (EPC).

4. At the outset, therefore, we would like to make the important point that in our view it is essential that as much encouragement as possible is given to affected landlords to improve their properties on a voluntary basis, before the onset of compulsion. Otherwise there will be a last minute rush which could well result in properties being left vacant because there is a lack of available resources at that time to carry out the necessary improvements. We believe that the best way forward is to try to maximise voluntary uptake so that as few properties as possible are left to be dealt with under the compulsion provisions from 2018 onwards. Otherwise there could be very considerable disruption to the housing market and the PRS in particular. Currently, there are no signs that the major shortfall in housing provision is going to be addressed even by 2018. Indeed the reverse is likely to apply because of the growing population and an increased demand for renting properties in the PRS because of all the current problems besetting owner/occupation, obtaining mortgages and the shortage of accommodation in the social sector.

5. Therefore, we consider that it is vital that special attention is paid to monitoring the progress of implementation of the Green Deal in the PRS.

6. For these purposes when we talk of the Green Deal it is important to note that a considerable amount of improvement work may, in fact, be undertaken via the Energy Company Obligation (ECO). As this will achieve the same objective the use of ECO funding to effect improvements in the PRS also needs to be monitored to gather information regarding the uptake.

7. Separately, improvement works may be privately funded. Particularly where only a small amount of work is undertaken, PRS landlords may prefer to self fund without recourse to either Green Deal finance or ECO. This may have an impact but it is, of course, difficult to measure; nevertheless, it is important to try to gauge this uptake because of the resulting beneficial impacts.

8. Of course, this is not all about compulsion. Some properties may well be improved that are already at E on an EPC and, again, this needs to be monitored. Nevertheless, in the context of the PRS, it is bringing properties up to the minimum standard which is key in view of the advent of the compulsion provisions later on.

9. It is not, however, just about monitoring it is about taking initiatives to address the situation should the uptake be disappointing. One needs to learn from experience; one of the key problems at the moment is certainty that an upgrade to an E on an EPC will be sufficient for these purposes. We have urged Government to put into place the necessary regulations to implement the relevant provisions of the Energy Act 2011 so that landlords know well in advance what will be required of them from 2018 onwards. Without this certainty landlords will sit on their hands and not take any action. Unfortunately, PRS landlords have learned from past experience that the goal posts can often be changed, even very late in the day. We are pleased to report to the Committee that the Department for Energy and Climate Change (DECC) have listened to these representations and have now put in place measures to start consulting with interested parties, including representatives of landlords, regarding the implementation of these provisions. Nevertheless, because of various regulatory requirements it is a long timetable and it will take until 2014 before the relevant regulations are passed. We are concerned about this and would hope that DECC would be able to review this timetable with a view to making these regulations at the earliest possible opportunity, without, however, adversely affecting the need for a full and open consultation, as well as ensuring that the regulations are properly drafted.

Monitoring Progress/the EPC

10. We see the EPC as being at the heart of this process. There should be a “before” and “after” EPC produced where works are carried out. This will show a number of things but importantly the resulting change in categorisation.

11. Monitoring the number of EPCs prepared for the purposes of carrying out a Green Deal assessment is also important because it will reveal the number of enquiries made where no further action is taken it is just as important to know the number of cases where thought has been given to carrying out the work but has not proceeded in, in order to identify the reasons why no further action has been taken. In particular, this will help identify problems with the system as well as impediments to improve properties under Green Deal.

Green Deal Participants

12. If the Green Deal is a success then the number of participants will increase significantly to take advantage of the business opportunity. This should be a good indicator of the health of the Green Deal. This will include things such as:

The number of Green Deal providers.

The number of assessors.

The number of installers.

13. Leading on from this it is important to identify the sectors in which those involved as participants are willing to work in:

Domestic sector.

PRS domestic sector.

Non domestic sector.

14. Additionally, one needs to look at the extent of the involvement of participants geographically as follows:

Nationally.

Regionally.

Central urban areas (there can be problems of access and parking, eg in Central London for example which could be a problem).

15. This will enable areas where the number of participants is disproportionately low to be identified. Clearly as monitoring can take place through the accreditation schemes although these will not always show who are particularly active. Some participants may simply register because they do occasional work, eg as part of a major project.

Monitoring of Data

16. It is important that separate data is obtained for the domestic sector, PRS domestic and non domestic sectors. We are particularly concerned based on past experience that there has been a reluctance on the part of participants under existing CERT and CESP schemes to engage with the private rented sector. They have been very keen to get involved with the social rented sector but have perceived the PRS as having obstacles to involvement.

17. By keeping a record of the number of assessments carried out and the number of plans confirmed it should be relatively easy to ascertain the uptake level.

Questionnaires

18. We can see no way other than separate questionnaires to households who have had Green Deal assessments carried out but have failed to have plans confirmed to establish a number of things:

Whether they have in fact carried out the works recommended without getting involved with Green Deal finance.

The reasons why they have not proceeded.

Their perceptions of the process and, again, whether this played a part in any decision not to proceed.

19. Likewise, it would be important to have follow up questionnaires to those who have had works carried out to establish their experiences. In particular, it will be necessary to identify cases where only part of the necessary works have been carried out to establish the reasons why some work has been done and other work not carried out. Again, it will be useful as part of this process to follow up on the financing methods to see whether the works were financed by ECO, Green Deal finance or privately.

Reasons for not Proceeding

20. When collecting data, carrying out surveys or issuing out questionnaires it is important to establish in the cases where work has not been done (or where part only of the work has been done) why that may be. This could include for example:

Failure in credit rating—see further below.

Inability to obtain consents, eg from landlord or the bill payer where the tenant is the bill payer but the landlord is undertaking the work.

Difficulties in securing planning permission where required.

Any issues arising under building regulations as a result of the need to obtain these.

21. It would be important to obtain evidence of the reasons for the refusal if possible. Otherwise the information given in reply could be anecdotal and, for example, some tenants who do not want the upheaval could simply say that their landlord refused to agree.

Ease of Generating Information

22. As indicated above, an EPC will be generated when an assessment is carried out and another new EPC will be generated once the works are completed where works are carried out. In cases where works have been undertaken this should enable much of the necessary data to be generated on update works and savings without too much difficulty, so long as the EPC software is sufficient for these purposes.

23. EPC’s also carry a list of optional works where either Green Deal or ECO should be available to fund the works.

24. Likewise, the EPC (before and after) should show standardised energy usage and costings and therefore provide information regarding energy, its cost and carbon savings, although this will be on a standardised basis.

Credit Scoring/Assessment

25. Whilst we have continuously raised this issue during consultations regarding Green Deal it has only just become clear that normal financial assessments will apply in accordance with Office of Fair Trading requirements. Hopefully, of course, the savings generated by energy efficiency measures should be offset by a reduction in energy costs. However, this will be approached on a standardised basis. DECC and the OFT have made it clear that this is not enough and an individual credit assessment is going to be needed. This could bear down particularly in the PRS which increasingly is having to house more and more less well off people in the community as social housing waiting lists expand and less social housing is provided. As indicated above, therefore, it is very important to capture information regarding the number of applications which are declined due to adverse credit rating. Presumably this is information which Green Deal providers could be required to provide. Indeed, we are worried that this may prove to be a significant problem for uptake of Green Deal in domestic PRS. There may, on occasion, be issues with credit scoring for landlords also if landlords themselves undertake the works and have to be credit scored.

PRS Take Up

26. Specifically, we feel that information is needed in relation to the specific take up in the PRS, as indicated above, including failed take ups. As suggested above this could include a number of factors:

Tenant not willing to consent.

Poor credit scoring for tenant.

Poor credit scoring for landlord.

27. Coupled with this there needs to be a record of:

The number of properties in the PRS where at least one measure is installed under Green Deal and ECO.

Take up of the various different types of ECO in the PRS.

As also mentioned above the number of those involved where there is providers, installers or assessors who are willing to work with the PRS.

Targets

28. At this stage, we do not feel that any target would really assist. Targets have to be achievable and, at the moment, there is insufficient experience to set realistic targets.

ECO

29. In our view, and also as indicated above, it is just as important that information is kept in relation to how ECO is rolled out. The same considerations do not necessarily apply, eg there would be no credit scoring if the project was solely funded by ECO. We believe that ECO has an extremely important role to play in the PRS. PRS stock is generally older and therefore they it will be harder to treat properties for which ECO is, in part, designed. We have also welcomed the decision of the Government to provide ECO for affordable warmth on an area basis. Therefore, uptake identifying the number of properties treated and the areas involved as well as the types of property and measures installed would be important in order to monitor the impact of ECO in bringing about energy efficiency improvements.

Costings

30. Information needs to be collated from Green Deal providers and installers as to the cost of various measures so that comparisons can be made. This is very much dependent on market forces, cost of materials and labour etc. Only when this information can be gathered can a judgment be made as to whether the Green Deal is giving value for money for consumers. It is suggested that sampling is undertaken so as to establish the costings; not just based on estimates but on the final cost of the works undertaken and delivered to the consumer.

Customer Satisfaction

31. We feel, at the end of the day, the best way of measuring customer satisfaction is by questionnaires to those who have had works completed and sample follow up surveys to dig down to obtain further information as well as to try to verify the general outcome of information received from questionnaires. Small prizes could be offered to people who answer questionnaires for example.

Conclusion

32. The Association very much welcomes this Inquiry because it is important that a body such as the Select Committee makes recommendations as to the parameters to apply in relation to this very important topic of monitoring progress regarding the implementation of Green Deal. This is a novel project so it is important that lessens are learned and proper information is kept and maintained from the outset.

January 2013