Minimum Energy Efficiency Standards: Cost Caps for Landlords

Question

Asked by

To ask His Majesty’s Government why the cost caps proposed for landlords in the social and private rented sectors to meet the Minimum Energy Efficiency Standards are different.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare my interest in the private rented sector, with rented cottages in Buckinghamshire and Lincolnshire.

My Lords, all renters deserve warm and safe homes. Both consultations on the minimum energy efficiency standards for private and social rented homes sought views on the options of a £10,000 and £15,000 maximum spend requirement. During the consultation, we engaged extensively with a broad range of stakeholders to understand the potential impact of the policy and how we can ensure that requirements are fair and proportionate for landlords and tenants. The difference between the proposals reflects the different starting positions of the sectors and the need to support social landlords to deliver the biggest increase in social and affordable housing in a generation. Final decisions have not yet been taken. We will consider responses to both consultations to ensure that an appropriate figure is set for each tenure.

I thank the Minister for her response. Surely the guiding principle should be that tenants in the social rented sector should have the same level of investment in their properties as those in the private sector. I think that is an important principle. The Government are proposing to increase the current cap from £3,500 to £15,000, and to achieve this requires a fair and workable funding model. Given this, will the Government consider a graduated cap on the amount landlords would be expected to spend to meet the planned energy efficiency standards, taking into account factors such as the rental value of the property, its location, its age and its heritage? With such a balanced approach, I think we will see landlords staying in the private sector, but without it we may see sales.

I thank the noble Lord. Obviously, there is clear value in common standards. The reason we consulted on a different level for the social housing sector was twofold: to provide finance for social housing delivery and due to the fact that social housing landlords can often achieve an economy of scale in dealing with their properties. As I said, no decisions have been taken yet. To respond to the noble Lord’s point on financing, there were a number of proposals in the consultation about managing the cost burden on private landlords, including a cap on the maximum investment required per property, an affordability exemption and a range of other exemptions for circumstances in which upgrades may not be feasible or appropriate, such as in the case of traditionally constructed and heritage buildings.

My Lords, there is a significant number of homes that remain hard to decarbonise for which the interventions required to meet energy efficiency standards can be extremely costly. In the social housing sector, while the majority of housing associations are on track to meet EER C by 2030, for some they can meet it only by selling homes, unless there is a cost cap. I note what my noble friend said in her reply, but I urge her to say a little more about whether the Government plan to implement the £10,000 spend exemption for MEES for the social rented sector, either in a time-limited way or as a permanent exemption.

I understand the points the noble Baroness is making. That is one of the reasons why we consulted on two different levels. The consultation for the implementation of MEES would require social homes to have energy performance certificates at rating C or equivalent by 2030. There is currently no minimum energy efficiency standard in the social rented sector. Some 72% of social rented homes are already at EPC bands A to C. More than 600,000 social homes are in fuel poverty, so improving the energy efficiency of social homes will help reduce energy bills and tackle fuel poverty. This is important. Having gone through the debate on Awaab’s law the other day, I know it is vital that social homes are brought up to the standards we all want to see.

My Lords—

My Lords—

I defer to the noble Lord.

That is very generous of the noble Baroness. Further to the Question asked by the noble Lord, Lord Carrington, has the Minister seen a survey by the National Residential Landlords Association indicating that 31% of private landlords are planning to leave the market in the near future, aggravating the existing shortage? What steps is the Minister taking to encourage long-term institutional investment by institutions—insurance companies and pension funds—to remedy this shortage?

The Government value the contribution made by responsible landlords and believe that they must enjoy robust grounds for possession and so on, but there is good reason for them to think about these reforms. They have nothing to fear from our reforms. The sector has doubled in size since the early 2000s. There is no evidence of exodus since reform has been put on the table. Our proposals make sure that landlords have the confidence and support that they need to continue to invest and operate in the sector. However, we are determined to level the playing field between landlords and private tenants by providing the latter with greater security. The noble Lord mentioned institutional investment. There is already institutional investment taking place through our major banking organisations to support private landlords to do the work that they need to do. That goes alongside a range of government funding, which will help with the differences that we all want to see.

Thanks to my generosity, the noble Lord, Lord Young, has covered half of my question, so I will make a quick switch. The minimum energy efficiency standards consultation made no mention of heat networks, which are mainly used by the social housing sector. Many are inefficient, old and very expensive to upgrade. What assessment has been made of the impact of these proposals on the viability of heat networks? As some are privately owned, how can this sector be responsible for improvements of networks that it does not own?

This is a very important question for those tenants who find themselves on heat networks. The noble Baroness is right to point to the fact that, while some of them have been maintained well and looked after, for others that is not so much so. We have allocated £1.29 billion of funding from the warm homes plan specifically to support energy efficiency improvements in social homes as part of wave 3 of the warm homes social housing fund. We are generally very much in favour of heat networks, and I hope that those organisations that operate heat networks will approach the department for that funding. The funding will deliver support to 144 projects across England. I hope that will provide some financial support for those organisations facing that dilemma.

My Lords, we agree that it is desirable to have energy-efficient homes but for many older and, in particular, listed homes this can be difficult. The Government are lifting the cap for private rental landlords to meet the EPC C rating by 2030 from £3,500 to £15,000. Already, this is a potentially significant burden on landlords. Many might consider it no longer worthwhile and seek to sell, meaning fewer desperately needed rental homes. Given this change, what assurance can the Minister give to landlords that the cap will not be increased further and that the requirement will not go beyond the EPC C rating?

I hope I made it clear in my earlier answer that no decisions have been taken yet. We will report on the outcome of the consultation. We consulted on a number of proposals to manage the cost burden, including a cap on the maximum investment required per property, which I think is what the noble Lord was getting at, and the other exemptions that may not be feasible or appropriate, including heritage buildings, for which I understand it might be difficult in those circumstances. We have a number of avenues of support for landlords to improve their properties. The boiler upgrade scheme offers £7,500 off the cost of a heat pump. There is the warm homes local grant, which will fund measures such as insulation and solar panels for eligible low-income households. We are doing what we can to support private landlords with a package of measures that will help them to introduce safe and warm homes.