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Changes to energy efficiency standards could affect rural landlords

Minimum Energy Efficiency Standard (MEES) regulations for privately rented homes in England and Wales are a vital step towards tackling fuel poverty and carbon reduction but could prove a major financial challenge for landlords to meet, especially those with properties in rural areas, says OFTEC.

Paul Rose, chief executive of OFTEC.

The MEES was first introduced in April 2018 to ensure all privately rented properties meet a minimum Energy Performance Certificate (EPC) rating of Band E before they can be let to a new tenant, or a tenancy renewed or extended.
 
Updates to the regulations this April mean landlords must now pay up to £3,500 (incl. VAT) towards the cost of energy efficiency improvements in sub-standard rental homes, funding these either from their own pockets or with third party support. 

The MEES will become even more stringent from April 2020 when landlords will be required to improve all Band F and G properties, even when tenants are staying in place, or face penalties of £2,000 – £150,000.
 
According to the English Housing Survey 2017-18, the private rental sector has doubled in size since 2002 and now accounts for 4.5 million or 19 per cent of households. Of these, 25 per cent fail to meet the Decent Homes Standard – a quality standard for council and housing association properties.
 
The data also shows that a far higher percentage of rural housing stock falls into the lowest EPC bands, with some 97 per cent of oil using homes currently rated Band D or below. Rural landlords are therefore more likely to face property upgrade costs and this could have unintended social consequences.

Paul Rose, chief executive at OFTEC, comments: “Reducing heat demand from UK housing stock, particularly from older, poorly insulated properties which ‘leak’ heat, should be a crucial part of any heat decarbonisation strategy where financially and practically possible. It is also a vital step in reducing fuel bills for those struggling most to affordably heat their homes.
 
“However, meeting the MEES could prove a heavy financial burden for many landlords, especially those with multiple properties or extensive upgrades to fund. With around 40 per cent of homes in villages in England and Wales built pre-1919 and constructed very differently to modern, well-insulated properties, the issue is likely to disproportionately affect rural landlords. There is no question that in 2019, no one should be living in sub-standard homes. However, the legislation could cause some landlords to pull out of the rental market because they can’t afford the property upgrade costs. At a time when the number of renters is soaring, the need is for more rental homes, not fewer.”
 
The MEES could also mean some tenants are left without a home if the property they live in suddenly becomes illegal. Some landlords may also try to offset the cost of home improvements by passing it onto tenants through increased rent.

This would put further strain on already tight household budgets and potentially push even more people into fuel poverty. It could also further inhibit tenants’ ability to save for a deposit on their own property, keeping more people in the rental trap.
 
Mr Rose concluded: “OFTEC absolutely supports the overall concept of MEES - reducing fuel poverty and carbon emissions are priority issues. But as with all strategies, it’s important to consider the variables as there is never a one-size-fits-all solution. The reality is that rural housing stock in the UK is amongst the least energy efficient in Europe. Heat demand from these homes must be reduced where practically possible but this will inevitably prove a costly exercise. We need to ensure the transition to a decarbonised future is a just one and that policies introduced do not inadvertently cause further hardship or penalise those most in need.”

25 July 2019

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