It adds that the Autumn Statement by the Chancellor - expected in November - would be the right time to introduce incentives.
Expressing his support for the letter’s call to action, NRLA chief executive Ben Beadle says: “We all want to see rental properties become as energy efficient as possible, but it is crucial that government sets out a clear strategy and realistic time frame on how landlords can make this happen. Ministers must assemble a clear, workable financial package to give landlords confidence and clarity as a matter of urgency”.
Dear Chancellor of the Exchequer,
Re: Incentivising energy efficiency investment in the private rented sector
We are writing as a coalition of financial institutions, consumer groups, fuel poverty organisations and landlord and letting agent associations to encourage the reintroduction of tax exemptions for energy efficiency improvements made to privately rented properties. This will make investments more attractive to landlords and property agents, while reducing energy bills for renters.
There is a compelling case for boosting energy efficiency in the private rented sector. Citizens Advice highlighted that renters face widespread problems with damp, mould and cold, with 1.6 million children exposed to these conditions.
Around two-thirds of privately rented properties in England and Wales fall below EPC C, the government’s target rating for all fuel poor homes by 2030.
There is evidence that tax incentives could help make investments more attractive, incentivising retrofit. Recent survey evidence from Propertymark, the UK’s leading professional body for property agents, shows that nearly 70% of agents think that support should extend to allow energy efficiency improvement to be offset against capital gains tax.
A simple tax restructuring to allow energy performance improvements to be deductible against rental income could help make investment more attractive for landlords. Individual landlords currently pay income tax on their rental properties at the same rate as other earned income.
Before they work out how much they will be taxed, landlords may deduct costs of managing the property, legal fees, replacement furniture, insurance, utility bills, ground rent and maintenance and upkeep – but not energy saving improvements. We encourage this allowance to be expanded to include expenditure on improvements that result in an increase in the Environmental Impact Rating of the property, or included in an agreed list of measures (i.e., loft insulation, cavity wall insulation, etc). This would represent a maximum tax revenue foregone of £1.2bn to 2028, or around £0.24bn per annum over 5 years.
This simple tax change could drive investments that bring about significant energy bill savings for renters and support a shift towards higher standards, helping meet fuel poverty targets. We would be pleased to discuss this further.
Kind regards,
E3G
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All energy saving upgrades need to be tax deductible in the year of purchase. Advances in technology mean specifically listing certain currently available upgrades would hamper innovation.
Just think back to what was available 10 years ago and compare it to today's options.
Heat pumps were pretty much unheard of, smart heating controls were very basic, etc.
Solar panels are a good example of how quickly technology can change. Ones installed this year are far superior to ones installed 10 years ago. Today a combination of solar panels, battery storage and time of use electric tariffs made possible by smart meters are producing savings we couldn't have dreamt of a decade ago.
Even something as basic has a low energy lightbulb has improved immeasurably in a decade.
Never happen 🤔 they hate us 😱
This is a great idea and I'm pleased that so many organisations have joined together to help the thousands of domestic landlords make their rental units 'fit-for-possible' and future ready. The Government's £35 billion Energy Price Guarantee bale-out went straight into the bank accounts of world's largest producers of natural gas - the states of Qatar, Iran, Russia and Norway. REAL MONEY that's left UK bank accounts and that will never be spent on the NHS, schools, pot-holes, lower taxes et al. Let's not kid ourselves, this happened because millions of PRS houses and flats are not insulated to modern standards - they are not fit-for-purpose. I'm an out-and-out capitalist but even I can see that the Social Rental Sector has been insulting their units like crazy over the last 10 years but the PRS has chosen not to. Us private sector landlords can't say we didn't have the capital - we've had historic low interest rates since 2009. We've had almost free money for the last 13 years, but have we chosen to invest in making our 'product' better for the tenants who actually pay us? Car makers have made their product better, mobile phone makers have made their product better. The PRS has not made their product better.
The Government's consultation paper on moving the Minimum Energy Efficiency Standard (MEES) from EPC Grade E (where's it's been since 2018) to Grade C suggested a target date of 2028. I think it would be sensible to set the next MEES standard as Grade D as from 2028. Let's do this transition one-step at a time. Now is also the right time to change the main domestic EPC measurement (the graph at the top of the certificate) to be the CO2 pollution measurement (also called the Environmental Impact) and bring it into line with the 1 million commercial EPCs on the nation's public database. We can still have the old running cost measurement as the secondary EPC Grade. By moving to measure CO2 pollution instead of running cost, EPCs and MEES will then encourage the transition over to intelligent electric heating & insulation. This will then move us away from burning imported fossil fuel gas from some of the most unsavoury countries in the world.
You still taking the tablets Martin? Absolute drivel!
We personally have forked out over £11000 on new double glazing windows and doors as well as low energy light bulbs every where, 30 cm thick loft insulation in just one student house. Managed an EPC pf C. Took advice about another property where we'd already fitted new windows and doors but was rated D. Told to get to C we would have to remove the boarding in the loft and put at least 30 cm of loft insulation. A further cost of £1100. The result still D, but now just 1 point below C. Gutted.
Wasn't sure what to think about this but having seen Martin supports it, it's a big NO from me.
Thanks Martin!
I am with you, Robert - not because of Martin's support, but because I have been alienated by the Renters Reform Legislation
The concept of tenants being able to save on energy costs and do their bit to save the planet should be applauded, but just as with so much in housing there is no Research to show whether conservation measures have any benefit. The same argument goes for fire precautions licensing, gas certificates RRO etc. they all just sound good, but on a cost risk basis, have no benefit at all they do is push up the cost of housing. I have operated nearly 200 HMOs. I pay for the energy in these properties and I can find no benefit from fitting A rated boilers, roof and wall insulation, low energy bulbs and double glazing to my utility bills. How do I know this because I read the utility meters every week and there is no change in the energy used between the before and after the installation of conservation measures. I appreciate that HMOs do not behave like ordinary residential properties. Tenants simply open the window when it gets too warm. I still find it hard to believe that insulation has no effect.
What the NRLA should be doing, is carrying out its own independent research. Start with A rated boilers. They do nothing to save energy and are not as robust as the old boilers. With energy conservation they have got the first three letters correct, it is a con!
I am not saying that insulation and double glazing has no benefit it makes the property often more comfortable and helps reduce the dreaded mould but as for saving money on energy, no change!
There are only three ways to save on energy costs in HMOs. The main one is to fit prepay electric meters in every room which I found can reduce energy use by up to 50%, restrict the heating which is questionable from housing standards and upsets tenants and saves only about a third of the cost and the easiest, change for the cheapest energy supplier. I have written a book on how to fit prepaid meters which I provide free of charge.
Jim HaliburtonTheHMODaddy
The increase in the price of electricity must be hugely to blame for fuel poverty in renters. 10 years ago it was 10p kWh now it's 35p whereas gas is about 7p. No amount of insulation is going help people with electric heating - we need electricity prices to come down drastically!
Good point Tricia,
On another similar matter; We are urged to buy Electric Vehicles. I'm very pleased with mine, but not in increasing cost of recharging it. Even worse when we can't complete a journey without having to charge it up at a petrol station etc. (We've changed to one with a better range now). The Government is making new petrol cars unavailable from 2030. That's just 7 years away. I bet the recharging stations that will take over will cost us just as much, if not more, as petrol by then!
It's all well and good. But what % of residential properties are rented?.. Why pick on rented property? All properties should be efficient. It's simply unfair to pick on landlords. Just tax incentives alone is not enough. If these EPC regulations stay as they are planned, there won't be any properties left to rent as they will get sold. Leaving a very low stock and sky high rents.
I think the suggestion to target level D initially is a great idea combined with grant funding and tax releifs.
We also need better guidance on how to deal with stone build flats surrounded by privately owned flats. They just don't think things through.
The government not thinking things through 🤔 never, won’t hear of it 😂
This government have pushed landlords to the brink with their punitive taxes and poor management of the sector they are starting to wake up and smell the coffee that there are no rental properties left and push decisions into the long grass. I think it’ll take more than a revenue expense incentive for me to insulate walls and floors in my north east England Victorian end of terraces! Full grant and loss of rental income might cover it.
When you look on your EPC, and you see the current rating, verses the potential rating, improvements to make your home more energy efficient, could cost from £4K to £14K, for internal or external wall insulation.
Then you have the double glazing, the replacement boiler etc.
A lot of spending, no tax holidays, I'll welcome some form of incentive.
Well all the energy saving measures we have taken haven’t shown us any increase in Bank Balance as the savings have been wiped out by increased energy prices.
Nevertheless we would be much worse off if the measures hadn’t been done.
And everything is based on a flawed metric! Sort out the algorithm THEN ask LLs to meet it!
Not me Tricia - I am out, not tugging my forelock anymore, unless my properties meet a C under the new rules with very minimal work, I really do mean that…. Bit more loft insulation etc….. then I am doing nothing other than selling 🎉🎉💰💰
Of course it is common sense that improvements to rental properties that make life better for tenants should be tax deductible, after all the government get their bit in capital gains tax if the property is sold, and if it’s not sold the tenant gets the benefit. But at the moment there is no commonsense from the powers that be. So I recommend that Landlords who find it uneconomical to improve the properties insulation, to just sell up that property and when there is an even worse rental property shortage. It will be the governments problem to sort out and not hard pressed Landlords.
Tax deductibility is the absolute minimum assistance landlords should get. We don't benefit from any of the savings so why should we be expected to pay for EPC upgrades out of tax paid money?
A good program of public information on how to heat a house efficiently would be useful. Demystify heating programmers and explain how walls act as heat stores, etc.
Grants without ridiculous means testing criteria would be nice. Also the provision of decent heating controls. How little would it cost if the government bulk ordered a couple of million modern heating programmers and gave them to gas engineers so they could install them for anyone who was willing to pay a small fee for installation while they were doing the annual gas safety check?
How much money and energy do tenants waste on inappropriately heating their houses? How much mould damage do they cause because they are too scared to even switch the boiler on?
One of mine (low EPC C) spent huge amounts of money being cold last winter. For some bizarre reason she kept the heating programmer in her bedside drawer and only had it on for an hour in the morning (until the minute she left the house) then for half an hour in the afternoon when the kids got home from school. The rest of the time she used a convector heater as the government were paying £400 towards her electric so it must be cheaper! When I compared her bills with those of a similar age and size bills inclusive student house it turned out the student house paid about £100 more for gas but were warm all year and the student house paid over £500 less for electric even though they made extensive use of the tumble dryer.
So the bill paying tenant didn't save any money and was cold and surrounded by wet washing in just about every room. The house became damp and mouldy and as her solution for overcoming the smell of damp was to burn scented candles there is also soot on most of the walls and ceilings.
I hear you Jo Westlake, tenants need to also be educated about the basic fundamentals on living in a rented property.
I had tenants who wouldn't use the electric heating because 'it is expensive' but still paid £80 pm for electricity. They had the timer on the hot water 'on' for 23hrs a day (doesn't it know when I want hot water?) & used the tumble drier twice a week for a couple of hours (doesn't everyone?) because the house was too cold to dry them! Had mould in the house for the first time ever & boy did it get cold with no heating being used!
There are huge numbers of Properties let that has a garden.
I can’t understand why more use is not made all weather natural driers.
It can rain all it wants but clothes can’t get wet as it has a plastic corrugated roof, well vented at sides, up on stilt legs with plenty of ventilation and drafts.
I suppose you know all this if not try a Lennon drier, no electric required but you could finish them off in drier if required.
That is a great, simple suggestion Michael. I hope people are listening.
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