National Residential Landlords Association (NRLA)
Energy efficiency support failing to help most in need
Just five per cent of private rented households have received government help to fund energy efficiency measures despite having the greatest need.
Although more of those classed as fuel poor live in the sector, private rented households received only half of the help given to those in the social sector.
According to the English Housing Survey, a third of private rented sector housing was built before 1919. This is the hardest to treat and accounts for a larger proportion of the sector than for any other housing tenure. Across England’s entire housing stock, 84 per cent of properties built before 1919 had an energy rating or D or worse.
With 62 per cent of private rented homes having an energy rating of D or below this will largely account for why 37 per cent of all households classed as fuel poor are in the private rented sector compared to 23 per cent in the social sector.
Data shows that 97 per cent of private rented properties with an energy rating of D or lower could reach C or better.
Despite this, just five per cent of private rented households across England have received any financial support under Government schemes to improve the energy efficiency of housing. This compares to 21 per cent of owner-occupiers, 12 per cent of council households and 11 per cent of those in housing association properties.
Ministers want all new private rented tenancies agreed from 1st April 2025 to be in properties with an energy performance rating of C or better.
According to government figures, it would cost an average of over £7,500 to bring rental properties needing it to an energy rating of at least C.
The National Residential Landlords Association is warning that this makes the Government’s ambitions to improve the energy efficiency of the rental housing stock a pipe dream when the average net annual rental income for a private landlord is less than £4,500.
That is why the National Residential Landlords Association is calling for a bespoke financial package to support the improvements that are needed.
Among the NRLA’s proposals is the development of a scrappage scheme to upgrade windows in private rented homes. A higher proportion of properties in the sector have no double glazing than any other tenure.
It is calling also for energy efficiency measures carried out by a landlord to be offset against tax as repair and maintenance, rather than as an improvement at sale against Capital Gains Tax. This would address anomalies including that whilst replacing a broken boiler is tax deductible, replacing one for a more energy efficient system is not.
Ben Beadle, Chief Executive of the National Residential Landlords Association, yesterday said:
“We all want to see energy efficient rental homes. They cut bills for tenants, make homes more attractive to potential renters and help the country to achieve its net zero commitment.
“The Chancellor needs to develop a financial support package that works for landlords and tenants. This should especially be targeted at the hardest to treat properties where the cost of work will be prohibitive for landlords. In this way, he will also be doing the most to help the fuel poor.”
- Further information about the NRLA can be found at www.nrla.org.uk. It tweets @NRLAssociation.
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- A number of the figures cited come from the 2019/20 England Housing Survey. Of note:
- Table 3.1 at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1000780/Energy_Chapter_3_Annex_Tables_v2.ods reports that 5.2% of private rented sector households had received any financial support under Government schemes to improve energy efficiency of the properties. This compares to 21% of owner-occupiers, 11.6% of local authority households and 11.1% of those in housing association properties.
- Table 2.1 at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/945377/2019-20_EHS_Headline_Report_Section_2_Stock_Annex_Tables.xlsx reports that 32.4% of private rented dwellings were built before 1919. Just 20% of owner occupied and 6.3% of social rented homes were that old.
- Table 1.4 at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1000109/Energy_Chapter_1_Annex_Tables.ods reports that 83.7% of homes built before 1919 have an energy performance rating of D-G.
- Table 4.3 at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1000058/EHS_19-20_PRS_Ch_4_tables.ods reports that 97.1% of private rented properties with an energy performance rating of D-G would be able to achieve a C rating or better.
- Table 1.2 at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1000109/Energy_Chapter_1_Annex_Tables.ods reports that 61.7% of all private rented properties have an energy performance rating of D-G.
- Table DA6201 at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1000137/DA6201_Insulation_-_dwellings.ods reports that in 2019 6.1% of private rented dwellings had no double glazing compared to 3% of owner-occupied properties, 2.8% of council houses and 2.4% of housing association dwellings.
- The Government’s annual Fuel Poverty Statistics for in England can be accessed at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/966509/Annual_Fuel_Poverty_Statistics_LILEE_Report_2021__2019_data_.pdf. It notes that: “The majority (39.1%) of fuel poor households are owner occupied, 37.6 per cent are privately rented and 23.2 per cent live in social housing. As a comparison, 64.3 per cent of all households are owner occupied, 18.8 per cent privately rented and 16.9 per cent live in social housing.”
- The Government’s consultation: “Improving the energy performance of privately rented homes” closed in January this year and can be accessed at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/946175/prs-consultation-2020.pdf. It notes that the Government’s preferred policy is that for all new tenancies in the private rented sector, properties should have an Energy Performance rating of C or better by 1st April 2025, with all tenancies reaching this targeted by 1st April 2028.
- The English Housing Survey Private Rented Sector report for 2019/20 (see https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1000052/EHS_19-20_PRS_report.pdf) notes that the average cost to bring a private rented property with an EPC rating of D or lower to at least a C would be £7,646.
- The English Private Landlord survey reports that the average (median) gross rental income for a landlord (before tax and other deductions) is £15,000. See page 6 at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/775002/EPLS_main_report.pdf.
Average costs for landlords would be:
- Repair and replacement of furnishings – based on the previous tax exemption for 10% of annual rent (£1,500)
- Cost of a gas safety certificate (average £80 required annually – checkatrade average)
- Electrical safety check (average £265 performed every 5 years. £53 annually – checkatrade average)
- Deposit protection (£13 from TDS)
- Tenant referencing cost (for two tenants £49 NRLA tenant referencing)
- Interest-only mortgage for the average UK property (£250,000) with a 20% deposit (cheapest available £6,096 annual)
- Insurance (£531.15 for building and contents insurance from Hamilton Fraser using average floor space for PRS property https://www.statista.com/statistics/292206/average-floor-area-size-of-dwellings-in-england-by-tenure/)
- Agency fees (£1200 based on 8% agency fees)
We calculate the below based on an average landlord of a house let to a couple with an interest only mortgage. Assuming tenants move annually.
Total gross rental income – £15,000
Repair and replacement costs – £1,500
Tenancy management costs – £726.15 (includes average cost of insurance, gas safety certificates, 1/5 of the EICR cost, deposit protection and tenant referencing)
Agency fees – £1,200
Total deductions before tax and mortgage costs – £11,573.85
Amount that can be taxed – £2,314.77 (£11,573.85 x 0.20)
Tax after mortgage interest relief accounted for – £1,095.57 (£2,314.77 – (£6,096.00 mortgage costs x 0.20)
Remaining balance after Tax – £10,478.28 (£11,573.85 – £1,095.57)
Mortgage costs – £6,096.00 (based on cheapest available 80% Loan to Value mortgage on the average property in the UK of £250,000)
Remaining balance after all average costs deducted – £4,282.28 (£10,478.28 – £6,096.00)
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