A group of banks and building societies, consumer groups and landlord bodies have written to the Chancellor of the Exchequer to encourage new fiscal support to improve energy efficiency standards in the private rented sector.
One in four households in the UK private rented sector is in fuel poverty. 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. However, at present there are no universally available incentives for landlords to increase the energy performance of their property.
The letter – supported by groups including Nationwide Building Society, Citizens Advice, the National Residential Landlords Association, Propertymark and Homes for Good letting agent – notes that a “simple tax restructuring to allow energy performance improvements to be offset against rental income could help make investment more attractive for landlords”. Individual landlords currently pay income tax on their rental properties at the same rates of tax as other earned income. 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. The letter encourages this allowance to be expanded to include expenditure on improvements that result in an increase in the efficiency of the property.
The call comes days after Housing Secretary Michael Gove indicated that he wanted to delay the planned introduction of higher energy efficiency standards for the private rented sector, raising the minimum requirement to EPC C by 2025. In a new briefing, E3G highlights how fiscal incentives can help pave the way for higher standards – as seen in Scotland, Germany and France – making investments more attractive to landlords.
Juliet Phillips, Senior Policy Advisor for E3G says:
“Private renters are among the hardest hit by the cost-of-living crisis. The problem is exacerbated by the poor state of rented homes – with nearly a quarter of properties in the sector classed as ‘non-decent’ by government data, resulting in high energy bills and unhealthy homes for tenants. Despite the compelling case for action, at present, landlords have limited incentive to make energy-saving investments. There is consensus across consumer groups, financial institutions and major landlord groups on the need for clarity of the road ahead towards higher standards. The forthcoming Autumn Budget is an opportunity for the government to provide a tax nudge to incentivise action and pave the way towards improved efficiency and lower bills.”
Ben Beadle, Chief Executive, National Residential Landlords Association said:
“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”
Timothy Douglas, Head of Policy and Campaigns at Propertymark, the UK’s leading professional body for property agents said:
“We all want to see more energy-efficient homes, but the new rules and requirements must be realistic and achievable. A simplified exemptions regime and additional financial support must be made available otherwise the measures in their current form, will not be achievable and that would mean further reductions in the supply of rented accommodation available.”
Susan Aktemel, founder and executive director at Homes for Good letting agent and property management company says:
“At Homes for Good we pride ourselves as landlords in maintaining our homes to the highest standard possible. We are wholly committed to providing energy efficient homes for our tenants, and ensuring they meet the EPC targets outlined. The investment required for this coincides with an incredibly challenging financial environment for landlords, and so offsetting the expenditure of these much-needed measures will be of significant help, both to landlords and the tenants who will have reduced bills as a result.”
Damian Thompson, Director of Landlord at The Mortgage Works said:
“If no action is taken to help landlords make their homes more energy efficient, the ambitious net zero targets set by government will simply not be met. The consequences of this do not stop at reducing emissions but extend to further impacting the lives of renters. At a time when renters are disproportionately impacted through the rising cost of living, we request the Chancellor to act quickly and decisively by enabling landlords to offset energy-efficiency improvements against their income tax. This will serve to improve housing standards and lower energy bills for renters’ future.”
The Mortgage Works is the buy-to-let arm of the Nationwide Building Society and the second largest provider of buy-to-let mortgages.
Notes to Editors
- Signatories to the letter include Nationwide Building Society, E3G, Citizens Advice, Coventry Building Society, National Energy Action, Paragon Bank and Homes for Good letting agent
- E3G has published a briefing here: Incentivising energy efficiency improvements for UK private renters: Autumn Budget briefing
- The government consulted on increasing private rented sector minimum energy efficiency standards in 2020, considering whether to raise the minimum EPC rating to EPC C for new tenancies from 2025, and all tenancies from 2028. The policy includes a £10,000 cost cap for landlords, and the impact assessment shows that the average spend for landlords would be £4,700. For homes currently rated EPC D, the cost to upgrade would be less than £1,000.
- E3G analysis shows that moving ahead with the regulations as planned could save tenants an average of £570 on their energy bills, an aggregate saving of £1.75bn.