LGA submission to governments consultation on the Improving the energy efficiency of privately rented homes

The Local Government Association (LGA) is the national voice of local government. We are a politically led, cross party membership organisation, representing councils from England and Wales. 

Our role is to support, promote and improve local government, and raise national awareness of the work of councils. Our ultimate ambition is to support councils to deliver local solutions to national problems.

Councils want to work as partners with central government to tackle poverty and climate change with a focus of eradicating poverty and transitioning to net zero. Net zero can only be achieved with decarbonisation happening in every place across the country and this will require local leadership.

Local authorities particularly, have spent considerable effort on delivering all the government schemes designed to improve the fabric energy efficiency of homes and public buildings and start to decarbonise domestic and public buildings. The Private Rented Sector now need to bring there housing stock up to a comparable level of energy efficiency to avoid a two-tier housing system.

Energy bills remain twice as high as five years ago, and fuel poor households are least likely to afford DIY energy efficiency measures or have the agency if in the private rented sector, but they are most likely to be impacted by fluctuating energy prices. This has widespread impact, on individual budgets, wider economy and increased strain to an already overburdened health system.

Local government has a duty to enforce minimum energy efficiency standards in the private rented sector. There are currently several barriers that need to be removed if councils are to be able to do this effectively. Councils are not directly funded to undertake this work and as a result, levels of effective enforcement vary across the country. Given there will be a need to enforce enhanced MEES in PRS, councils must be funded appropriately if the threat of enforcement is to be sufficient. Reliable data available to councils is also currently insufficient and needs to be addressed.  

The cheapest, and lowest carbon energy is the energy you don’t need and don’t use. Fabric first should be retained as governments leading policy position as it supports energy security ambitions, reduces cost and increases thermal comfort, which in turn supports healthy living which reduces adult and child social costs including healthcare costs. Focus should be on the low-cost measures with the quickest payback such as loft insulation. 

The LGA and the National Housing Federation commissioned a piece of work to understand what proportion of social housing was hard to decarbonise and discovered that only five percent of social housing required investment of over £20,000 to reach Net Zero. 

1. Do you agree with government’s preferred position of using new alternative Energy Performance Certificate (EPC) metrics following EPC reform as the basis for higher Minimum Energy Efficiency Standards (MEES) for privately rented homes? 

Answer to question 1

Yes, we do agree with governments preferred position of using new alternative EPC metrics following EPC reform as it is expected that new metrics will focus on cost, thermal comfort and carbon reduction. What is most important to tenants is cost, comfort and ease of use. These should be the primary considerations of the Home Energy Model (HEM) methodology with carbon reduction factored in for the national interest. Some PRS tenants will be more interested in the carbon performance of the property than others, but all will want a comfortable, affordable home to live in. 

The current EPC methodology is no longer fit for purpose as it relies too heavily on the efficiency of the gas boiler and the cost of running it. With a move to electrifying heat and encouraging the use of heat pumps, the EPC methodology will not recognise the potential cost savings and carbon reduction that can be achieved by heat pumps

2. Government would welcome views on options for setting future MEES against a combination of new EPC metrics. Do you agree with government’s preferred approach of having a requirement to meet a primary standard set against the fabric performance metric and then a secondary standard set against either the smart readiness metric or heating system metric, with landlord discretion on which secondary metric their property meets? 

3. What are your views on the alternative approaches of: Alternative 1: A requirement to meet a standard set against dual metrics of equal weighting. The standard would be set against dual metrics including two of the following: fabric performance, heating system and smart readiness. Alternative 2: A requirement to meet an overarching standard set against all three metrics of fabric performance, heating system, and smart readiness, either through improvements across all standards or through landlords concentrating improvements against one or two standards. 

4. Do you have any alternative suggestions for how government could utilise new EPC metrics as the basis for MEES, such as a single metric approach (e.g. fabric or cost based?) Please provide a rationale with your answer. 

Answer to questions 2, 3 and 4

The cheapest, and lowest carbon energy is the energy you don’t need and don’t use. Fabric first should be retained as governments leading policy position as it supports energy security ambitions, reduces cost and increases thermal comfort, which in turn supports healthy living which reduces adult and child social costs including healthcare costs. Focus should be on the low-cost measures with the quickest payback such as loft insulation. This should remain as the primary metric as it requires minimal user participation to activate or manage the measure.

Heating systems need to be used and used effectively if they are to provide any benefit to the occupant and/or save carbon emissions. If a heating system or its programming mechanism is not easily understood or easy to operate this could result in its inefficient use or not being used at all. Individual room heaters are always available as an alternative to the central heating system and are sometimes, mostly incorrectly, considered a cheaper, more efficient option. They are also easy to use so could be considered an easier option.

Smart Readiness also requires the tenant or occupant to have a level of technical ability to utilise the smart credentials effectively and may also require the tenant to own devices that facilitate optimal operation. This limits the potential benefits associated with smart readiness and could make the investment ineffective.   

If government continues to consider that the secondary metric should be decided by the landlord, when there is a tenant in situ, this should be a decision that the landlord makes with the tenant as both the Heating System and the Smart Readiness measures would likely need some technical ability from the tenant to utilise effectively.  

5. Do you agree with government’s proposal to increase the maximum required investment for Private Rented Sector (PRS) MEES to £15,000 per property and for landlords to be able to register an exemption if expenditure would take them over this figure? If not, please set out whether you consider a cap should apply and how; and if so, what level you consider the cap should be set at and why (whether this is the 2020 proposal of £10,000 or another figure). Please explain your answer. 

6. Should government extend the exemption period for the cost cap to ten years? If not, how long do you think the cost cap exemption should last? Please explain your answer. 

Answer to question 5 and 6

Considering inflationary impacts and the higher cost of energy now, as opposed to five years ago, the Local Government Association (LGA) agrees that the cost cap should be lifted to £15,000 per property. 

Any registered exemption as a results of necessary works taking them over the £15,000 price cap needs to be detailed and verified to ensure all investment options have been considered fully. Councils could undertake this role if resourced to do so as an enforcement prevention activity.

A graduated approach to extending the exemption period should be considered rather than a one size fits all approach. Given the cost of energy at present and the number of families living in fuel poverty in private rented homes, extending the exemption to 10 years should only apply to properties that have reached EPC D, with EPC E properties remaining on 5-year exceptions with a supplementary £5,000 cap for the period between the 5- and 10-year exemption date. Properties in F & G should retain the 5-year exemption.

The social housing sector has been investing heavily in fabric energy efficiency retrofit for many years and as a result social housing is becoming cheaper to run and more comfortable to occupy than many private rented homes. 

The LGA and the National Housing Federation commissioned a piece of work to understand what proportion of social housing was hard to decarbonise and discovered that only five percent of social housing required investment of over £20,000 to reach Net Zero.

7. Do you agree with government’s preferred implementation timeline to require ‘new tenancies’ to meet the higher standard from 2028 and ‘all tenancies’ to meet the higher standard by 2030? If not, do you have alternative suggestions? 

Answer to Q7

Agree

8. Do you agree with government’s proposal that, as an EPC reform transition measure, landlords should be able to demonstrate their properties are compliant with the existing standard of EPC E using their past EPC? Improving the energy performance of privately rented homes in England and Wales

Answer to question 8

In the absence of the new MEES standard it would seem overly burdensome for properties that were an E prior to the HEM methodology, to be required to get back to E, before being required to get to a C two years later. However, in these circumstances, whether a cost cap should be considered applicable should be thought through carefully.

9. Do you agree properties that have an EPC rating of C against the EER on EPCs before 2026 should be recognised as compliant with the future standard until their EPC expires or is replaced? 

Answer to question 9

Agree

10. Do you agree with government’s proposal to require landlords to commission a new EPC before taking action to comply with higher MEES? 

Answer to question 10

Agree

10.1 Should the cost of this new EPC be included within the cost cap? 

Answer to 10.1

No. The cost of the EPC should not be included in the cost cap as it is not part of an improvement.

10.2 Should landlords still be required to commission post-improvement EPCs? If yes, should the cost of the post-improvement EPC also be included within the cost cap? 

Answer to Question 10.2

Yes, landlords should be required to commission post improvement EPCs and no they shouldn’t be included in the cost cap

11. Should government develop an affordability exemption? If yes, what eligibility criteria would be the most appropriate for an affordability exemption? Please indicate which, if any, of the proposed approaches you support or otherwise provide alternative suggestions.

Answer to question 11

The cost cap should be sufficient for the purposes of ensuring landlords are safeguarded against unrecoverable costs. Given the variation in property prices and associated rents across the country there is an argument for the cost cap to be variable across the country. Higher in places which attract higher rents.

12. Should government apply the PRS MEES Regulations to short-term lets? Please explain your answer. 

Answer to question 12

The risk with not applying the PRS MEES Regulations to short-term-lets is that they end up being used as long term lets. Also, regardless of who pays the bill, an inefficient property wastes energy which may or may not be from carbon rich sources. Achieving net zero, energy security and economic growth would suggest that all properties should be energy efficient to achieve all of governments aims.

13. What actions could government take, including changes to the law to encourage or require smart meters in properties undergoing efficiency upgrades, to increase the number of smart meters installed in the PRS? Please provide your rationale and evidence for any suggestions for actions you have. 

NA

14. Do you think the current MEES exemptions available to landlords are suitable?

14.1 Are there other circumstances, not covered by the current MEES exemptions regime, where you think government should consider making exemptions for? 

Answer to question 14 and 14.1

The only exemption available to landlords should be the cost cap, which is an exemption over and above the £15,000. The other existing exemptions are not required and could be used to game the system. The third-party consent exemption is a concern as it opens the door to coercion, with no opportunity to scrutinise. 

15. Do you agree with government’s preferred position to keep a potential requirement on lettings agents and online property platforms under review whilst the PRS Database is being developed for properties in England? 

NA

16. Do you have any new evidence to submit regarding the topics as summarised in Chapter 2 of this consultation? Please specify which topic you are providing new evidence for. 

NA

17. Is there any additional information or evidence you would like to provide on either the effectiveness of the existing PRS regulations 2015 and guidance, or interactions with other policies?

No