Energy efficiency: building towards net zero Contents

5The Rented Sector

Private rented sector

102.The private rented sector has grown by over 40 per cent in the last ten years.251 It now represents around 20 per cent of the housing market in England, compared to just 10 per cent in 1999, with Wales seeing a comparable increase.252 This tenure is the worst performing area in energy efficiency, with 35 per cent of fuel poor homes in the private rented sector.253 Progress in the rental market has been constrained by ‘split incentives’, where landlords meet the costs of energy efficiency upgrades and tenants are perceived to reap the benefit. But there are a range of benefits to making energy efficiency upgrades for landlords as well: raised property values; properties that are easier to let; reduced risk of rent arrears; lower tenancy turnover and less occurrences of condensation and dampness.254 Ultimately, as landlords run a business, they should be responsible for renting out properties that are safe and affordable to heat.

103.We welcome the Government’s strengthening of regulations to protect tenant rights in relation to energy efficiency. Amended Private Rented Sector Minimum Energy Efficiency Standards (MEES) came into force from 1 April this year. These require private rented properties in England and Wales to reach at least EPC Band E, making new tenancies for properties rated F and G illegal.255 The rules primarily target new tenancies or contract renewals, but by 2020 will apply to all domestic rented properties. When the legislation came into force it was projected that around 300,000 rental properties did not meet EPC Band E.

104.Until now, landlords of properties rated F and G have been able to easily secure exemptions to MEES. These properties did not have to be improved unless energy efficiency measures could be financed at ‘no cost’ to the landlord (unless the owner could access third-party funding to help cover the costs of improvements). When introduced in 2015, it was envisaged that the regulations would result in 70 per cent of the tenure’s Band F and G properties being upgraded to Band E.256 It was anticipated that the majority of landlords would make use of Green Deal Finance to fund energy efficiency improvements, recouped through tenants’ energy bills.257 But with the demise of the Green Deal, a lack of access to funding for energy efficiency has increased the prospect of obtaining a MEES exemption.258 The Government has now tightened the regulations, placing a cap on the exemption rule. Landlords are now only eligible for an exemption if recommended energy efficiency improvements cost over £3,500.259

105.The Clean Growth Strategy set a goal for as many private rented homes as possible to be upgraded to EPC band C by 2030.260 This long-term trajectory is vital for tackling fuel poverty as a substantial number of fuel poor homes are living in private rented properties with EPC Bands E and D.261 We welcome the Government’s planned consultation on a trajectory policy design later this year.262 It is important for the Government to provide landlords with early clarity on the path to ratcheting up regulations to ensure landlords are able to plan investments and install the most cost-effective package of measures to meet the “C” standard.263

Cost cap

106.Despite welcoming the amended MEES regulations, witnesses warned that the £3,500 cost cap seriously limits the scope and impact of the regulations.264 According to the Government’s impact assessment, the £3,500 cost cap will only result in 48 per cent of Band F and G privately rented properties being upgraded to Band E by 2020.265 We heard that by missing the other 52 per cent of EPC F and G rented properties, the Government is likely to miss its near-term fuel poverty milestones, because there are more fuel-poor households in the private rented sector in F and G than in any other tenure.266 Furthermore, Lord Deben, Chairman of the Committee on Climate Change (CCC), referred to the cost ceiling as a “nonsense”, stating that “the Government will have to change this very fundamentally” if it is to meet its carbon budgets.267

107.A number of organisations, including the Committee on Fuel Poverty, advocated a higher cost cap of £5,000 to achieve closer to the 70 per cent upgrade conceived when the regulations were originally developed.268 We share the concerns of stakeholders. The policy risks leaving tenants of the least efficient properties without a route to improving the insulation of their home as their landlord will fall within the cost cap exemption and will not be eligible for ECO3.269

108.Research undertaken by the Residential Landlords Association found that over a third of landlords with F and G properties could not afford to bring their property up to E standard, reporting costs of over £5,000.270 It is crucial that the MEES regulations are combined with routes to making energy efficiency upgrades, particularly when the trajectory moves beyond Band E.271 As discussed in the previous chapter, the Government should ensure there are low interest finance mechanisms in place to support all property owners, including landlords, to make upgrades. This is the approach taken in Scotland. Private sector regulations are matched with access for landlords to interest-free loans up to three properties, which can be combined with a cash back incentive.272

109.The Government should be more resolute in its approach to regulating the energy efficiency of the private rented sector, so only exceptional and exorbitant costs can be avoided by landlords. We are concerned that current ceiling of £3,500 that is attached to the Minimum Energy Efficiency Standards (MEES), allowing landlords to claim an exemption if works exceed this level, seriously restricts the scope of the regulations. We therefore recommend that the Government raises the current cost cap attached to the private sector regulations to £5,000 so the regulations achieve closer to the 70 per cent upgrade of the lowest rated properties that was envisaged when first developed.

Enforcement of the Minimum Energy Efficiency Standards

110.Compliance with the regulations is crucial to their success, but we are concerned that the current regulations lack teeth.273 Local authorities are responsible for enforcing the standards. Councils have the power to undertake checks of properties, issue compliance notes to landlords, and enforce financial penalties.274 But stakeholders were not convinced that the regulations are being enforced by local authorities, due to a systemic lack of capacity.275

111.Local authorities also have the opportunity to publicise details of landlord non-compliance on a public register, although they are under no duty to do so.276 The public register of penalty notices issued by councils can be accessed online,277 but as of May 2019 not a single council in England and Wales had used the register to declare any penalties they had imposed against non-compliant landlords.278 We acknowledge that the empty register does not confirm that no enforcement activity has taken place against landlords who are in violation of MEES rules, but it does cast doubt over whether the ‘publication penalty’ for those breaching the regulations will be pursued.

112.The Government tried to reassure us by stating that local authorities have been asked to report on their enforcement plans as part of their biennial Home Energy Conservation Act (HECA) returns.279 But only 151 of 326 Local Authorities submitted reports in March 2017.280 Nonetheless, we welcome the 12-month enforcement studies that BEIS is running to help understand the most effective ways for enforcement authorities to implement the standard and act against non-compliant landlords.281 We were told by BEIS that the results of these studies will be developed into an enforcement best practice toolkit.282 The toolkit needs be underpinned by sufficient resources.283 Expectation alone is not going to drive enforcement.

113.We welcome the Government’s strengthening of the Minimum Energy Efficiency Standards, but with strained local budgets and competing priorities, we are concerned that there is weak enforcement of the regulations by local authorities, making them effectively valueless. We recommend that the Government rigorously monitors enforcement of the regulations and properly resources local authorities to ensure that they have capacity to impose the standards.

Social rented sector

114.The Clean Growth Strategy stated that BEIS will consult on how social housing, which accounts for 17 per cent of the UK’s housing stock, can meet EPC Band C by 2030.284 Social landlords have control over whole estates, access to capital and approach investment in terms of coordinated stock upgrades. With over half of the social housing stock in the UK currently reaching EPC Band C, the sector is already outperforming other tenures.285 There is a clear case—underpinned by the fact that this is Government-funded stock—that social housing should lead the way in terms of energy efficiency. Upgrading this stock could provide a route to scaling-up technologies, trialling innovation and driving down costs for energy efficiency across the market.286

115.However, a report by Sustainable Homes, an organisation that supports the housing sector through research and consultancy, in February 2019 found that long-term strategies within the social housing sector to upgrade the energy performance of their stock in line with the UK’s 2050 climate obligations do not exist.287 This is despite it being within the reach of nearly all social landlords’ financial planning cycles.288 Social landlords have to navigate a range of competing priorities.289 There are unavoidable tensions between pressure to build new homes, operating within a rent-setting regime, and expecting social landlords to invest in upgrading the energy efficiency of their stock—within an environment of limited financial resources.290 We are concerned that the uplift in investment required per annum to upgrade the social housing stock to EPC Band C would leave some housing associations in breach of their financial regulations. Due to the vulnerable circumstances of many residents, retrieval of funds is undesirable and often not viable.291 Thus, social landlords need to manage the tension between allocating funding to improving the energy efficiency of their stock and the limits to cost recovery; making sure that future investment is not taken away from the delivery of new homes.292 Meanwhile, for the most part, the easy energy efficiency work has already been completed.293

116.We are concerned that the social housing sector is not going to be able to undertake more complex, expensive works without a change in policy or investment.294 Despite these problems and the Minister telling us that the social rented sector should be “a flag bearer” and an “exemplar” for energy efficiency standards, there remains no policy framework or trajectory for the social housing sector.295 The dearth of policy persists even in the face of repeated calls from the CCC for the Government to agree a delivery mechanism and trajectory immediately for the social housing minimum standards.296 Contributors to our inquiry proposed a range of solutions:

Box 6: Deep retrofit models

Energiesprong and Passivhaus standards as often pointed to as whole house retrofit models that should be trialled at scale across the social housing stock:300

Energiesprong: Originated in the Netherlands and has expanded into the UK with trials undertaken in Nottingham. Customers are offered a whole-house residential retrofit, centred on net-zero energy consumption. An Energiesprong retrofit generally encompasses the installation of off-site manufactured, insulated wall facades, combined with an air source heat pump and optional batteries, photovoltaic panels, in addition to ventilation and controls.301 The provider offers a 30-year energy performance guarantee. Energiesprong retrofits are funded with a whole-life financing model, where the cost is covered by energy savings and reduced home maintenance costs.302 According to Green Alliance, at least 11 million UK homes are suitable for Energiesprong retrofits, including 2.3 million social homes.303 However, in 2017 an Energiesprong retrofit cost £75,000, so the costs need to come down to increase demand for the model.304

Passivhaus: An international standard, based on high levels of fabric performance, which delivers very low-energy buildings. Over 1000 Passivhaus buildings have been completed in the UK.305 The core focus of Passivhaus is to dramatically reduce the requirement for space heating and cooling, whilst also creating high indoor comfort levels. In a Passivhaus building thermal comfort is achieved through use of passive measures: high levels of insulation with minimal thermal bridges; high level of airtightness; good indoor air quality; passive solar gains and internal heat sources.306

117.While the social housing sector is well-placed to provide leadership, the Government needs to provide targeted support to enable social landlords to do more.307 The National Infrastructure Commission recognised this and recommended in their National Infrastructure Assessment that £3.8 billion is allocated for energy efficiency improvements in social housing between now and 2030.308 Outside England, the Scottish Government is aiming to maximise the number of social rented homes achieving EPC Band B by the end of 2032. The Scottish Government has also set a minimum floor of EPC Band D from 2025 below which no social house may be re-let.309 The Home Energy Efficiency Programme for Scotland (HEEPS) loan scheme for registered social landlords provides loans of up to £1 million to help social landlords carry out energy saving improvements for their housing stock.310 In June 2019, the Scottish Government announced a further £3.5 million in grant funding for social landlords to improve the energy efficiency of their properties.311

118.The Government wants the social housing tenure to be a “flag bearer” but has failed to set out a trajectory for the sector, let alone a policy framework. Social landlords have to balance supporting investment in energy efficiency and the limitations of cost recovery; ensuring future investment is not taken away from provision of new homes. We are concerned that the social housing sector is not going to be able to undertake more complex, expensive works without a change in policy or investment.

119.We recommend that the Government acts with urgency to agree a trajectory and strategy for the social housing minimum standards. We recommend that the Government carefully considers the recommendation of the National Infrastructure Commission to allocate £3.8 billion to social housing between now and 2030. If the Government does not accept this recommendation, it should clearly set out in its response to the National Infrastructure Commission an alternative approach to upgrading this tenure. Once the Government puts a delivery mechanism in place for the social housing tenure, we recommend that social landlords are required to have a 30-year plan showing how they will manage their stock to ensure the tenure is aligned with the UK’s climate obligations.


251 Ministry of Housing and Local Government, English Housing Survey 2016–17, Headline Report (Jan 2018)

252 Ministry of Housing and Local Government, English Housing Survey 2016–17, Headline Report (Jan 2018); Shelter Cymru, Fit to Rent: Today’s Private Rented Sector in Wales (2015)

253 Committee on Fuel Poverty (CFP) (ENE0035)

254 Energy Savings Trust, Landlords (Accessed July 2019); Q347 [Perry]

255 Department for Business, Energy and Industrial Strategy, The Private Rented Property minimum standard

256 Committee on Fuel Poverty (CFP) (ENE0035)

258 As above

259 Department for Business, Energy and Industrial Strategy, Final Stage Impact Assessment: Amending the Private Rented Sector Energy Efficiency Regulations (Nov 2018)

261 Committee on Fuel Poverty, Third Annual Report 2018 (Nov 2018)

262 Department for Business, Energy and Industrial Strategy (ENE0069)

263 Energy Savings Trust (ENE0067); Building Societies Association (ENE0061)

264 Q28 [Slade; Sellwood; Smith]; Q279; Q290 [Lord Deben]; for written evidence examples: Citizens Advice Service (ENE0032); Committee on Fuel Poverty (CFP) (ENE0035); E.ON (ENE0027); Plymouth Energy Community (ENE0063); UK Green Building Council (ENE0042); E3G (ENE0014); CBI (ENE0013); Mineral Wool Insulation Manufacturers Association (MIMA) (ENE0037); Sustainable Energy Association (ENE0062); Regulatory Assistance Project (RAP) (ENE0064); Energy and Utilities Alliance (ENE0026); Association of Local Energy Officers (ENE0048); Energy UK (ENE0059); For alternative view, see: ARLA Propertymark (ENE0029)

265 Department for Business, Energy and Industrial Strategy, Final Stage Impact Assessment: Amending the Private Rented Sector Energy Efficiency Regulations (Nov 2018) Table 5, p.15

266 Q28 [Smith]

267 Q279; Q290 [Lord Deben]

268 Q28 [Slade; Sellwood]; Committee on Fuel Poverty (CFP) (ENE0035); National Energy Action (ENE0025); Plymouth Energy Community (ENE0063); UK Green Building Council (ENE0042); E3G (ENE0014); CBI (ENE0013); Mineral Wool Insulation Manufacturers Association (MIMA) (ENE0037); Sustainable Energy Association (ENE0062); Energy and Utilities Alliance (ENE0026)

269 National Energy Action (ENE0025)

270 Residential Landlords Association (ENE0003)

271 Charles Brett Pearson (ENE0005)

272 Energy Saving Trust, Home Energy Scotland loan - overview (Accessed June 2019)

273 Q86 [Billington]; Regulatory Assistance Project (RAP) (ENE0064); Plymouth City Council (ENE0047); Committee on Fuel Poverty (CFP) (ENE0035); Plymouth Energy Community (ENE0063); National Energy Action (NEA) (ENE0025); Sustainable Energy Association (ENE0062); UK Green Building Council (ENE0042); Citizens Advice Service (ENE0032). For research on the challenges facing local authorities in delivering energy efficiency in the private rented sector, see: Association for the Conservation of Energy, CAG consultations, The Warm Arm of the Law: Tackling Fuel Poverty in the Private Rented Sector (July 2018)

274 Department for Business, Energy and Industrial Strategy, The non-domestic private rented property minimum standard (Feb 2017)

275 Q86 [Billington]; Regulatory Assistance Project (RAP) (ENE0064); Plymouth City Council (ENE0047); Committee on Fuel Poverty (CFP) (ENE0035); Plymouth Energy Community (ENE0063); National Energy Action (NEA) (ENE0025); Sustainable Energy Association (ENE0062); UK Green Building Council (ENE0042); Citizens Advice Service (ENE0032); Association for the Conservation of Energy, CAG consultations, The Warm Arm of the Law: Tackling Fuel Poverty in the Private Rented Sector (July 2018); (ENE0074); Association for Decentralised Energy (ADE)

276 Department for Business, Energy and Industrial Strategy, The non-domestic private rented property minimum standard (Feb 2017)

277 HM Government, Private Rented Sector exemptions register (Accessed July 2019)

279 As above

281 Department for Business, Energy and Industrial Strategy (ENE0069)

283 Energy Savings Trust (ENE0067); Rockwool Ltd (ENE0038); Regulatory Assistance Project (RAP) (ENE0064)

285 As above, p.8

286 National Housing Federation (ENE0058); The Institution of Engineering and Technology, Nottingham Trent University, Scaling up retrofit 2050 (Oct 2018); Green Alliance, Reinventing retrofit: How to scale up home energy efficiency in the UK (Feb 2019); Green Alliance (ENE0006); Institution of Engineering and Technology (ENE0040)

288 As above

289 For a recent discussion on these, see: Report for the Department for Business, Energy and Industrial Strategy, What are the barriers to retrofit in social housing? (Jan 2018)

290 As above; See also: Q38 [Simmons]

291 National Housing Federation (ENE0058)

292 Q38 [Simmons]; National Housing Federation (ENE0058); Report for the Department for Business, Energy and Industrial Strategy, What are the barriers to retrofit in social housing? (Jan 2018)

293 Report for the Department for Business, Energy and Industrial Strategy, What are the barriers to retrofit in social housing? (Jan 2018)

294 As above; see also: Q38 [Simmons]

295 Q401, Q444 [Perry]

296 Committee on Climate Change, UK Housing: Fit for the future? (Feb 2019); Committee on Climate Change, Reducing UK emissions 2018 Progress Report to Parliament (June 2018)

297 E3G (ENE0014); The Energy Efficiency Infrastructure Group (EEIG) (ENE0041)

298 National Housing Federation (ENE0058)

299 National Housing Federation (ENE0058); for wider research and discussions on the role of ‘deep retrofit’ models in the social housing sector, see: The Institution of Engineering and Technology, Nottingham Trent University, Scaling up retrofit 2050 (Oct 2018); Green Alliance, Reinventing retrofit: How to scale up home energy efficiency in the UK (Feb 2019); Green Alliance (ENE0006); Institution of Engineering and Technology (ENE0040)

300 Committee on Climate Change, UK Housing: Fit for the future? (Feb 2019), pp.43–44

301 Energiesprong, What is Energiesprong? (Accessed June 2019)

302 As above

304 As above

305 Passivhaus Trust (ENE0022)

306 As above

307 Q58 [Simmons]; Rockwool Ltd (ENE0038); Green Alliance (ENE0006); Institution of Engineering and Technology (ENE0040)

308 National Infrastructure Commission, National Infrastructure Assessment (July 2018), p.45

309 Scottish Government, Improved energy efficiency standards reducing bills (June 2019)

311 Scottish Government, Energy efficiency grants for social landlords (June 2019)




Published: 12 July 2019