Government delay to insulation could cost private renters £1bn in energy bills

Despite consulting in early 2021, a delay to confirming new energy efficiency standards for private rented households, due to take effect in 2025, now means they may be postponed.

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By George Smeeton

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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, there has been no response to this consultation to date, meaning 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 a two-year delay to implementing these proposals could cost bill payers more than £1bn under a medium gas price scenario [2].

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%) [3].

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 [4].

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’ [5].

Commenting on the analysis, Jess Ralston,EnergyAnalystat the Energy and Climate Intelligence Unit, said:“Privately rented homes are often cold, unhealthy and are likely to cost the billpayer and taxpayer billions because of their poor insulation. Encouraging private landlords to invest in their properties will lift local economies while saving the NHS millions.

Questions are being asked about why something as simple as confirming a new standard is taking this long, when it could save households cash and generate growth at a time when UK growth is at best sluggish – and the Government will certainly be under pressure from landlords and tenants alike as they seek clarity.”

All PRS homes meeting EPC C in 2025 rather than 2028 could save private renters nearly £11bn by 2050. However, as gas crises occur every 10 years or so [6], a similar crisis to today in 2030 could see renters saving £3bn more, to around £14bn [7].

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 [8]. This could also support thousands of jobs as the installer workforce is stimulated to expand [9].

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 [10].

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 [11].

Analysis also shows that, if the National Audit Office’s £38bn estimate [12] 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.

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] Reasonable gas price scenario modelled is gas prices falling to 8p/kWh in 2025, then 7p/kWh in 2027, to 6p/kWh in 2029 and then down to 5p/kWh in 2036 through to 2050. Standing charge is assumed to remain stable at £100 per household per year.

[3] HM Government: English Housing Survey.

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

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

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

[7] High gas price scenario modelled is gas prices falling to 8p/kWh in 2025, 7p/kWh in 2027 and 6p/kWh in 2028, 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 2035, 7p/kWh in 2038 and then 6p/kWh in 2041 through to 2050. Standing charge is assumed to remain stable at £100 per household per year.

[8] Cambridge Econometrics

[9] E3G: Building the Future

[10] HM Government: English Housing Survey.

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

[12] National Audit Office: Energy bill support schemes

For more information:

George Smeeton, Head of Communications, ECIU, Tel: 07894 571 153, email: