Energy efficiency cost cap consultation on landlords and NLA response

We’re seeking views on the government’s proposal to amend the domestic Minimum Level of Energy Efficiency Regulations to introduce a capped landlord financial contribution element.

This proposal is designed to future-proof the regulations and make them as effective as possible, while protecting landlords against excessive cost burdens. With a cost-cap, domestic landlords would only need to see investment in improvements to an EPC F or G rated property up to the value of that cap. The government’s preferred cap level is £2,500 per property. A range of additional, alternative, cap options are set out in the consultation and the associated consultation impact assessment.

The consultation is intended for all interested parties including landlords and tenants, local government, energy suppliers, energy assessors, small and large businesses, consumers, and the general public.

NLA Official Response:

The NLA will be responding to the consultation in due course. While the reduction in the cost cap to £2,500 from the previously floated £5,000 is a welcome move, the introduction of any cost cap is not a policy that the NLA can support.

The Government states that they understand the “split incentive” inherent in the PRS, whereby the costs of improvements fall to landlords but tenants are the main beneficiaries. However, the imposition of a cost cap does little to solve this problem. It will further increase the financial burdens currently being heaped on to landlords and risks the costs being passed on to tenants or the removal of much needed affordable housing from the sector.

For example, these amendments would come into force at a time that mortgage interest relief restrictions are having an increased impact on landlords’ finances. The NLA recently commissioned Capital Economics to look at the financial impacts of these tax changes, available here.

We are disappointed that the proposals outlined in the consultation do not include the reintroduction of the Landlords Energy Saving Allowance (LESA), which was scrapped in 2015. The NLA had called for its reintroduction in last month’s Budget as a means to incentivise and encourage energy efficiency improvements across the whole sector, not just at the bottom.

We have not been alone in this call: the Labour party including the policy in their 2017 manifesto and the Government’s own Committee on Fuel Poverty has recommended LESA’s reintroduction.

CEO of the NLA, Richard Lambert, said:

“The Government’s commitment to energy efficiency evidently only goes as far as the Treasury allows. The about turn in forcing landlords to pay up to £2,500 in order to keep letting out their properties, when the Government initially proposed funding to help them do so, is a complete farce.

“The Government clearly thinks that landlords have cash to spare, just when its own changes to landlord taxation will soon be increasing the cost of providing homes to rent. There’s a real risk that some landlords who simply cannot afford the upgrades will find that leaving a property empty and unimproved becomes a realistic option. How does that benefit renters?

“Surely it would have been better to incentivise energy efficiency improvements across the rented sector by reintroducing the Landlords Energy Saving Allowance, which was scrapped in 2015, despite support from NLA, the Government’s own Advisory Committee on Fuel Poverty, and the Labour Party in their 2017 manifesto.”