PM scrapping energy efficiency regulations to hit renters in swing seats hardest

The Prime Minister scrapping the Minimum Energy Efficiency Standards in the private rented sector, announced during his net zero speech, could mean that around 2.8m privately rented homes may not receive energy efficiency improvements, new analysis by the Energy and Climate Intelligence Unit (ECIU) has found.

Of the 50 most closely fought seats in England in the 2019 General Election, which have a margin of around or less than 2,500 votes [1], 32 are estimated to have above average levels of private rented sector homes that do not meet the Government’s target Energy Performance Certificate (EPC) band C [2].

Darren Washington, and his partner Sarah Peart rent a 1940s house in Hartshill, Stoke with an EPC rating of E. The pair were spending "pretty much all" their income last Christmas on bills, Darren says, including £260 on gas and electricity a month and were trying to minimise costs by not using their heating much, wrapping up in blankets and keeping the curtains closed. Darren said: “I was worrying every day to get rent, council tax and utility paid. It's not good for mental health".

Washington would be willing to pay a little more rent for a more energy efficient home as it would "pay for itself in the long run". Fully subsidised green heating technology such as solar panels and heat pumps would be "fantastic", he adds.

In a poll conducted by Focaldata for the ECIU, 57% of respondents who are renters said that they thought scrapping the standards would mean higher energy bills that could worsen their cost of living. This proportion rises to two-thirds (64%) of renters aged between 18 and 34 [3].

In addition, the analysis found that 32 of the 50 most marginal seats have above average levels of fuel poverty [4], including Stoke-on-Trent Central where more than half of all homes (52%) are estimated to be in fuel poverty, compared to the average of around one in five households (27%) across England.

In Prime Minister Rishi Sunak’s constituency, Richmond in North Yorkshire, around 6,000 private renters in homes below EPC band C could pay over £25m worth of extra gas bills by 2050, or over £4,000 per home. This works out at around £1.1m per year, or around £185 per poorly insulated private rented home.

Around a third (32%) of all households in his constituency are also fuel poor and more than two in three (70%) private rented homes do not meet the Government’s target Energy Performance Certificate (EPC) band C.

Had the standards already been in place, private renters could have saved over £400m in total, or £140 per home in gas bills this winter [5]. However, insulation rates over the last decade have been 90% lower than their peak of 2.3m measures per year in 2013, and were just 95% of that level at 160,000 in 2022. So far in 2023, only 100,000 measures have been installed, so 2023 could see even lower numbers in total [6].

Private renters in constituencies that are considered to be in the ‘Red Wall’ could see extra gas bills up to over £600m between 2028 and 2050, or nearly £30m per year [1].

Minimum Energy Efficiency Standards for the private rented sector have been in place since April 2018, when it became a legal requirement for new private tenancies to meet EPC band E. This was expanded so that all private tenancies must meet EPC band E from April 2020 [7].

However, in 2021 there was a consultation [8] on whether the standards should be tightened again, so that all new tenancies must meet EPC band C by 2025 and all tenancies by 2028. In early 2023, it was widely reported [9] that the interim 2025 standard was to be scrapped anyway, leaving the 2028 EPC band C requirement for all private rented properties remaining.

In his net zero speech in mid-September, over two years since the consultation closed, the Prime Minister announced that “those plans will be scrapped…we’ll never force any household” to install energy efficiency [10].

The Government’s own research into the regulations [11], including consulting and focus groups with landlords, found that around two-thirds of landlords would use their savings to pay for upgrades, with only one in five suggesting they would put up rents. In addition, only 3% said they would sell their property rather than upgrade it, and a further 3% said they would upgrade it and then sell.

Citizen’s Advice are among the groups that spoke out against scrapping the regulations, with Clare Moriarty, the chief executive, warning that "The government's decision to row back on these policies will particularly hurt renters, leaving millions of tenants across the country facing needlessly high bills through the winters ahead" [12].

The Resolution Foundation also found “axing regulations to make privately rented homes more efficient will impact poorer households the most – a quarter of the very poorest families live in homes that will now not be improved” [13].

[1] HM Government: General Election 2019: full results and analysis. ‘Red Wall’ constituencies taken from Redfield and Wilton Strategies ‘Red Wall’ polling.

[2] Energy efficiency of housing in Parliamentary constituencies in England and Wales

[3] Polling conducted by Focaldata on 27th September 2023 of 1579 GB adults.

[4] End Fuel Poverty coalition data on levels of fuel poverty from October 2022.

[5] Based on Ofgem’s October 2023 price cap, and industry estimates for the January 2024 price cap. Winter is deemed to be October to March, as widely accepted in the energy industry.

[6] Household Energy Efficiency Statistics, September 2023.

[7] HM Government: Domestic private rental sector minimum energy efficiency standards

[8] HM Government: Improving the energy performance of privately rented homes

[9] The Telegraph: Buy-to-let investors forced to make eco upgrades by 2028

[10] HM Government: PM speech on Net Zero, 20 September 2023

[11] HM Government: Evaluation of the Domestic Private Rented Sector MEES Regulations

[12] Business Green: 'Now is not the time to delay'

[13] The Resolution Foundation

Methodology: ONS data for energy efficiency (Energy Performance Certificates (EPC)) of the private rented sector in each Parliamentary Constituency was combined with the Government’s estimates of regional split of private rented sector homes at each EPC band, to calculate how many private rented homes there are at EPC bands D, E, F and G. The expected bill savings missed to 2050 were calculated using Ofgem and Cornwall Insight data on expected energy unit rates and then ECIU estimated unit rates out to 2050.

Fuel poverty data is from the End Fuel Poverty Coalition, and General Election data from the House of Commons library. Red Wall constituencies were taken from Redfield and Wilton Strategies.

Background: standards of housing and demographics in the private rented sector

Standards of housing in the private rented sector are among the worst of any sector. Almost one in four households (23%) are classed as ‘non-decent’, which is roughly double that of the owner occupier and socially rented sectors. A similar proportion (24%) of households live in fuel poverty, higher than the social rented sector (19%) and owner occupier (9%). Over half (56%) of privately rented homes fall below EPC band C, which is much higher than the socially rented sector (31%).

Standards of private rented sector housing are poorest in the North and Midlands, for example three in four (74%) private rented homes in Yorkshire and the Humber fall below the Government’s target of EPC band C and two in three in the West Midlands (65%), compared to just four in ten (39%) in London.

Fuel poverty levels tend to be highest in areas where insulation standards are poor, for example around a third of all homes are now thought to be in fuel poverty [1] in both Yorkshire and the Humber (30%) and the West Midlands (29%), compared to 14% in the South East.

A recent Citizen’s Advice report found that 1.6 million children are living in privately rented homes that are cold, damp or have significant mould. The research also shows that private renters in homes rated EPC D-G were 73% more likely to experience damp than those in homes rated A-C, and they were also 89% more likely to experience excessive cold.

People living in privately rented homes tend to be younger than in the socially rented sector and in lower income quintiles to those in socially rented homes. They are also more likely to be ‘non-white’ (14% vs 7% in owner occupied homes) and around a third (30%) have one or more household members with a long-term illness or disability.

The Government estimates that the average spend for a private landlord under the regulations would be around £5,000, but a cap would be in place so that no landlord would exceed £10,000. There is already a self-exemption register to allow for properties where works would not be “practical, cost-effective or affordable”.

In addition to higher gas bills paid by tenants, analysis has shown that while excess cold in privately rented homes cost the NHS £1.2bn a year, the NHS saves 42p for every £1 spent on ‘keeping homes warm’ [2]. Had the private rented sector standards been implemented from 2028 as proposed, by 2050 the savings to the NHS could be over £26bn, the above analysis finds.

Investing in upgrading the energy performance of homes through measures like insulation could help to boost local economies, as previous analysis has shown that for every £1 invested in energy efficiency by Government, £3.20 is returned in GDP. This could also support thousands of jobs as the installer workforce is stimulated to expand [9].

Footnotes:

[1] End Fuel Poverty coalition data on levels of fuel poverty from October 2022.

[2] Buildings Research Establishment and Department of Health: Annual Report of the Chief Medical Officer.