Delaying insulation standards could cost private renters £1.4bn

In early 2021, the Government consulted on proposals that would see the Minimum Energy Efficiency Standards (MEES) in the private rented sector increased to meet Energy Performance Certificate (EPC) band C for new tenancies from 2025 and all tenancies from 2028 [1]. Currently, privately rented homes have to meet EPC band E to be let.

However, Department for Levelling Up, Housing and Communities Secretary of State, the Rt Hon Michael Gove MP, recently indicated that Government would ‘relax the pace’ of the proposals [2]. It has previously been reported [3] that the interim regulation on new tenancies from 2025 would be scrapped, meaning that all rented properties would have to meet EPC band C by 2028. A further delay to this deadline, to 2030, could mean the more than 2.4 million privately rented homes in England that currently fall below EPC band C could be facing higher bills for longer.

New analysis from the Energy and Climate Intelligence Unit has found that implementing the proposals in 2030 for all tenancies could cost bill payers more than £1.4bn under a medium gas price scenario [4]. It would also mean landlords face a cliff edge for all properties in 2030, with competition for the workforce to do upgrade work on homes.

Commenting on the analysis, Jess Ralston,EnergyAnalystat the Energy and Climate Intelligence Unit, said:“The government looks to be taking the side of landlords over the millions who’ve been stuck in cold, rental accommodation during a gas crisis that’s forced them to shell out hundreds on gas bills to try to keep warm. The main culprit here is the government – consulting on the changes in 2021 yet still not doing anything about this problem, even during a gas crisis, seems frankly irresponsible.  

“This is a net zero policy that would save ordinary people who rent money on bills, and could have been phased in gradually so landlords carry out the work over several years. The UK was hit hard by the gas crisis because of failure to get on with simple common sense measures like these, and we’ll end up more dependent on foreign gas imports because of it. As the OBR has pointed out recently a failure to shift away from volatile gas prices could add 13% of GDP onto our national debt.

“The first set of minimum energy efficiency standards in 2018 made no significant difference to the number of rental properties available, with the sector actually increasing by over 150,000 since 2021. So the landlord lobby may claim that they’ll go packing but the evidence points to the contrary.”

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%) [5].

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 [6].

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’ [7].

All PRS homes meeting EPC C in 2025 rather than 2028 could save private renters over £12bn by 2050. However, as gas crises occur every 10 years or so [8], a similar crisis to today in 2030 could see renters saving £2.5bn more, to around £14.5bn [9].

Aside from bill savings, 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 [10]. This could also support thousands of jobs as the installer workforce is stimulated to expand [11].

People living in privately rented homes tend to be younger than in the socially rented sector and in lower income quintiles. 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 [12].

A quarter, or 600,000, privately rented homes receive housing benefit, partly used to cover the costs of high rent, which in total will cost the taxpayer £14.2bn in 2022-23. Private rented households will receive around a fifth (22%) of this, or £3.2bn [13].

Analysis also shows that, if the National Audit Office’s £38bn estimate [14] for the total cost of the domestic sector Energy Price Guarantee is reached, privately rented accommodation would likely receive more than £7.5bn, over a fifth of the taxpayer funding despite being less than a fifth of households proportionately. This is as a result of poorer energy efficiency in this sector meaning that homes are likely to use more energy and therefore cost more than similar homes in other sectors.

ENDS

Notes to editors:

[1] HM Government: Improving the energy performance of privately rented homes. Note: Under the MEES landlords can self-register for an exemption for example if the works would not be cost-effective or practical: HM Government: minimum energy efficiency standards: interim evaluation 2020.

[2] The Independent: Delaying rented homes’ energy efficiency plans would be ‘alarming’ – think tank

[3] The Telegraph: Landlords to get five years to hit net zero targets.

[4] Reasonable gas price scenario modelled is gas prices remaining at 8p/kWh to 2026, falling to 7p/kWh in 2027, to 6p/kWh in 2036 and then down to 5p/kWh in 2045 through to 2050. Standing charge is assumed to remain stable at £100 per household per year.

[5] HM Government: English Housing Survey.

[6] Citizen’s Advice: Damp, Cold and Full of Mould.

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

[8] Was the European oil industry prepared for the current global crisis? and Britain’s energy market is blatantly rigged.

[9] High gas price scenario modelled is gas prices remaining at 8p/kWh in 2025, falling to 7p/kWh in 2027, before another crisis similar to today’s forces gas prices up to 10p/kWh again in 2030, falling to 9p/kWh in 2032, 8p/kWh in 2036, 7p/kWh in 2039 and then 6p/kWh in 2044 through to 2050. Standing charge is assumed to remain stable at £100 per household per year.

[10] Cambridge Econometrics

[11] E3G: Building the Future

[12] HM Government: English Housing Survey.

[13] Department for Work and Pensions: Housing Benefit.

[14] National Audit Office: Energy bill support schemes

For more information:

George Smeeton, Head of Communications, ECIU, Tel: 07894 571 153, email: george.smeeton@eciu.net