Landlords could be forgiven for letting out a collective groan when, minister Chris Huhne MP, announced the Government are to push ahead with new measures to encourage greater energy efficiency in the private-rented sector.
But unlike some earlier initiatives, the ‘Green Deal’, is a scheme designed to provide up-front funding for energy efficiency improvements including loft, cavity and solid wall insulation, floor insulation, draught-proofing and water pipe lagging.
Traditionally landlords have proved difficult to target with energy efficiency measures as the arrangement is typically one-sided – i.e. the landlord pays and the tenant benefits; what is known by the technically minded as the split incentive.
However, this scheme looks different:
1. There will be no capital outlay for landlords. The Green Deal financing will be paid back through the utility bills. Therefore, whoever pays the utility bills, pays back the loan.
2. The ‘Golden Rule’ of the Green Deal is that the combined cost of both the utility bills and the loan must be lower than if nothing had been done – so after the measures are installed tenants will be financially better off as they are paying less in utility bills; and warmer.
3. A warm tenant is a happy tenant, and happy tenants are likely to stay or longer; which reduces void periods and the need to re-market.
4. European legislation will shortly require landlords and letting agents to put energy efficiency ratings on all property adverts. A property with a higher EPC rating should be more attractive to tenants and so using the Green Deal and installing the improvements will make it easier to let.
5. Most importantly, these measures will protect the fabric of properties. Energy efficiency improvements reduce damp, mould, condensation and damage from frozen water pipes – so reducing long-term maintenance costs.
However, the devil may yet be in the detail. As with all new legislation, the Green Deal is a carrot to encourage landlords to embrace the energy efficiency agenda. Of course, where there is a carrot there is always a stick and the Green Deal is no exception. If landlords do not take up the Green Deal, from 2015 tenants will be able to demand ‘reasonable’ energy efficiency adjustments.
The NLA has received assurances that a property’s character will be considered in relation to any required works and the ‘Golden Rule’ will remain in force ensuring that the landlord will not be expected to pay any upfront costs.
But if a landlord fails to make requested adjustments – which are practical and covered by the scheme – local authorities may be able to fine them and insist the properties are insulated.
This gives landlords a five year window to insulate their properties free of charge. It is the private-rented sector’s opportunity to prove its social conscience by tackling climate change, that it’s a tenure offering high quality accommodation – once and for all dispelling the myth that landlords don’t care about their tenants. (Not to mention an opportunity to make some otherwise costly improvements).
There may be no such thing as a free lunch – but the NLA would advise landlords to at least take a look at the menu before making up their minds.