Blogs

Russell Smith, Managing Director of RetrofitWorks, the growing, not-for-profit co-operative, established to improve the UK’s existing housing stock in an environmentally friendly way through Trustmark accredited repairs, maintenance and improvement works, looks at the challenges of improving the Energy Performance of Privately Rented Homes (PRS) in England and Wales

With Government, businesses, councils and homeowners all now trying to up the ante in a bid to change behaviours as part of the UK’s mission to achieve our Net Zero pledge by 2050, large sectors of the markets and key stakeholders are being affected. This is especially evident in the Private Residential Sector (PRS) where significant potential legislation is looming. With the end of consultation expected any time now and possibly enshrined in law by 2025, the requirement for all private landlords to improve EPCs and future proof their housing stock is fraught with tension.

If we’re not careful, we’ll end up with an ‘appeasing’ approach that pleases nobody, but which more importantly, does not have the impact it needs to have to fight the climate crisis.

An Unclear Business Case

The current Minimum Energy Efficiency Standard (MEES) is EPC E and the current plan is to have EPC C by 2030 in the Private Rental Sector. It’s worth noting that this is under review and likely to be brought forward by 5 years to 2025. There is already pressure on PRS housing providers on how to achieve this and little incentive as to why they should invest – e.g., the landlord is responsible for the building fabric, but the tenant pays utilities. For the owner-occupier, the incentives are clear: you invest in a retrofit upgrade programme to save on future utility bills as well as improved comfort and health in your home. For landlords, no additional rental income is certain with improved energy efficiency so the business case for them is unclear. Many properties will require £10k-15k investment to meet the new standard.

The Journey to C

On the current scheme, there is threshold of £3.5k before a PRS landlord can apply for exemption. Therefore, if EPC F or G requires more than £3.5k to be spent to achieve E rating, the landlord can apply to make the property exempt and carry on renting it out. The new scheme – regardless of whether the deadline is 2025 (new proposed deadline for new tenancies), 2028 (new proposed deadline for existing tenancies) or 2030 (current plan) – is to increase the EPC to C rating and increase the exemption threshold, so significantly fewer properties can be made exempt. Many providers have a high turnover of residents or operate on Assured Shorthold Tenancies/ short-term leases basis, and it is suggested that even if the present incumbents have been residents for a number of years, a renewal lease or AST is deemed as a new contract, therefore falls within the 2025 deadline.

The Empty Home Syndrome

The other societal issue that can’t be overlooked is the fact that vulnerable households are more likely to live in fuel poverty than other households and as such, of course these new policies to improve energy efficiency will in general improve their situation. However, it is a risk that the additional investment requirements on landlords may reduce the size of the PRS as it becomes financially less attractive to be a landlord. In some situations, a landlord may sell a property that will move to the owner-occupied sector. If there are no interested buyers, the property may drop out of the housing market and become an empty home if the cost of continuing to let is outweighed by what can possibly be made in rental income. This would lead to greater housing scarcity for vulnerable households as many local authorities already struggle with making their local RSLs capable of delivering sufficient housing options.

RetrofitWorks believes that a mechanism to counteract this risk has to be introduced, possibly by broadening the scope of Homes England’s Affordable Housing Programme (AHP) and making best use of the currently available infrastructure. We need to ensure that those PRS landlords who would be unable to run a sustainable business would thus have time to sell to other PRS landlords, owner-occupiers, or Registered Providers funded by the AHP in due time, which would minimize the risks of negative impact on vulnerable households.

As if these issues aren’t complex enough, there’s also a lot of talk about potentially introducing new metrics to ensure the PRS hits targets, but again, are we overcomplicating life? Our view on the EPC is that though it might be improved, the EER and EIR are sufficiently good as metrics guiding towards Net Zero. This brings me on to the most important part of this article: I believe the greatest challenge we face is about having enough skilled people on the ground to make sure they can interpret the metrics, understand the legislation, have expertise on how to approach a ‘whole house’ or ‘whole housing stock’ situation and ultimately provide optimum green retrofit solutions.

Objective expertise on the ground

We must attract, train and retain expert teams of Domestic Energy Assessors and Retrofit Co-ordinators who work with robust systems to ensure that home surveys carried out are of a high quality. That’s why, although I realise it’s perhaps a unique stance, RetrofitWorks supports a future where all projects are driven by Retrofit Co-ordinators who can offer impartial advice and ensure the works are being done well to PAS2035 whether as part of a whole house or fabric first approach.

 Help to navigate the PRS minefield

 In summary, PRS is a complex sector with so many pitfalls and rabbit holes. Helping navigate markets like this from an environmental perspective was exactly why RetrofitWorks was established. We can offer advice on the why’s and how’s. We strongly believe working closely with landlords and managing agents is not about policing; it’s about offering good information on how to meet minimum energy standards, make their properties more habitable and their tenants happy. We can help landlords and managing agents better understand the requirements, work out what they need to do, create a plan for their housing stock portfolios, down to individual properties, support/facilitate the work, including supporting gaining access to any funding that may be/become available, and ensure required standards of work has been achieved; assess works; prioritise property types; issue Whole House Plans and, when required, Building Passports.

Ultimately RetrofitWorks is bringing technical expertise and structured relationships, bringing key stakeholders together as a leading authority on championing environmentally efficient focused retrofit. Given the importance and urgency of reducing greenhouse gas emissions, we must find a way to work together to create a PRS market that’s right for and incentivises all stakeholders, or we will not acheive the significant progress needed.

Note: RetrofitWorks has been instrumental in the latest The Construction Leadership Council has just released a consultive document on a National Retrofit Strategy. https://www.constructionleadershipcouncil.co.uk/news/national-retrofit-strategy-consultative-document/.