Improving the energy performance of privately rented homes ... · Web viewQuestion 1: We would welcome views on possible impacts of the policy on the size of the PRS sector, the effect

Improving the energy performance of privately rented homes – Stroma Certification Response

Introduction

Stroma Certification are delighted that government has issued this consultation, which represents an opportunity to comment and offer alternatives to the proposals within the document. Stroma Certification are keen for our members and clients to take this opportunity to provide the government with feedback, as this can prove vital in the process of creating legislation and regulations. We have already seen that the government is listening and willing to change their original proposals, where there is a groundswell of opinion and empirical data.

Question 1: We would welcome views on possible impacts of the policy on the size of the PRS sector, the effect this could have on vulnerable households, and suggestions to mitigate this effect where it does occur, including any evidence.

Stroma Certification believe the proposed legislation is key to the long-term strategic goals to improve energy efficiency and reduce carbon emissions associated with the housing stock in England and Wales.

The PRS sector is growing and therefore any improvements in the stock will have an increasing benefit to the government's targets. Less landlords own single properties, so there will be a greater potential impact on landlords, especially those with larger portfolios, made up of older housing.

It should be simple and easy to implement, understand and enforce, in order to be effective. We have already seen the impacts of MEES on the PRS sector, a lower level of impact (properties rated below an E). Whilst certainly not empirical evidence, there has been minimal negative reported impacts on landlords and vulnerable tenants. By ensuring that buildings that are rented are achieving a minimum energy efficiency standard, those tenants who are considered vulnerable should benefit from cheaper to run, warmer, more health homes.

As the minimum standard becomes more difficult to achieve, the impacts are likely to be felt most greatly by landlords. Our concern revolves around Landlord ‘dumping’ buildings that are going to be difficult to improve or rely heavily on the exemptions process both of which will not benefit tenants. The exemptions process must be both simple to use and easy to police, and the required evidence MUST robust and standardised.

Question 2: Do you foresee any impacts for protected groups? Please provide evidence to support your answer.

Having sufficient supply of lower cost housing is always challenging as demand usually outstrips supply.

It is clear from reviewing rental property listings, that the lowest cost housing tends to be on the lower end of energy performance spectrum and a concern is that the cost of improving these lower performing properties (up to the minimum spend values proposed) will be disproportionately costly when viewed in terms of the value of the property. This could manifest itself in landlord’s ‘dumping’ their lower value, poorer performing stock, which removes these cheaper rental properties from the market. The lower supply would therefore make it even more difficult for tenants to access lower cost rentals.

Additionally, it worth considering the challenges around accessing properties for protected groups. The worse performing properties may require extensive improvement works to take place and the inconvenience of this, over several phases may result in tenants not allowing access unless they are aware of the reasons and benefits of the work. Stroma Certification believes that education around the regulations, the concepts of energy efficiency and the benefits are key to successful implementation. There was very little awareness of the first phase of MEES within the tenant community. Stroma Certification educated our DEA members who had first-hand experience of this when assessing PRS properties. Stroma Certification also attended several Landlord Association events and lectures to raise awareness of MEES, and it was clear that Landlords were not fully aware of the implications of the regulations and we discovered that tenants were even less aware. Information for landlords is different to information for Tenants, and whilst there was an excellent document available for Landlords, it was not widely known about and there was very little information available that was dedicated for tenants. This should be considered as part of the review, and additionally, the way the information is made available for all groups – online, offline, social media, print etc.

Question 3: We would welcome views on any possible long-term impacts of COVID-19 that could impact on making the required energy efficiency improvements from April 2025 and suggestions to mitigate this effect where it does occur, including any evidence

Stroma Certification has evaluated the impacts of Covid on property visits in 2020, and in particular, the impact on the provision of EPCs during the pandemic. Outside of a full lockdown, which was the initial reaction to the first wave, where energy assessments were restricted to empty properties and covid secure spaces, the assessment industry was able to operate successfully and safely at very high volumes (approx. 140,000 EPCs per month). Therefore, Stroma Certification would suggest that assessments can continue outside of a full lockdown to the necessary levels required by MEES.

The installation of measures is not an area that we have expertise in, however, we suspect that certain measures may be more difficult to install in a pandemic situation, especially with vulnerable members of the public present. Stroma Certification would suggest that the legislation affords landlords appropriate grace to improve a building where it can be proven that measures are intended to be installed (contract or agreement in place to install) but it is not possible in the circumstances at play where applicable. A 6-month period of grace is afforded to new landlords upon purchasing a substandard property. A similar allowance could be applied to unforeseen circumstance such as a pandemic.

Question 4: Do you agree with the government’s preferred new target of EER C as a minimum energy performance standard in the PRS?

Stroma Certification welcomes the new target of EPC C as a minimum – we feel this is a challenging and ambitious target, we feel it is needed in order to contribute towards our energy efficiency strategy and contribute towards the Governments Clean Growth Strategy and the recently stated 10-point plan.

Stroma Certification would like the government to consider a blended approach to the minimum rating where it is not possible for the property to be improved within the cost cap or via the measures noted on the EPC (i.e., there is little scope for improvement).

In many off-gas properties, achieving a C rating is particularly difficult due to the weighting placed upon the EPC rating by the fuel cost. In many cases, even once the envelope is thermally improved the rating may still be below a C. However, these properties are more likely to use renewable heating sources.

Question 5: We would welcome your views on the pros and cons of these alternative metrics, in relation to our overall policy goals around reducing carbon emissions, fuel poverty, and energy bills; please provide evidence with your answer.

Fuel poverty remains one of, if not the major concern for energy policy drivers in the UK, and the EPC has fuel costs at its core – the EPC rating (Energ Efficiency Rating – EER) is heavily factored by the cost of the fuel that powers the heating and hot water in the calculation of the headline EPC rating.

However, this is not the only figure or metric that features or could feature on an EPC. Until recently, the following metrics were shown on the EPC;

· Current and potential Energy Efficiency rating (EER)

· Current and potential Environmental Impact Rating (EIR)

· Heat demand for heating and hot water

· Primary Energy (Energy Requirement per m2)

· Current and potential Carbon Emissions (in tonnes)

After the release of the new register, the EIR was removed from the certificate. This was done, it appears, as a result of market research and should be reinstated.

The government may wish to consider other metrics that focus on specific areas that support the policy goals. For reducing energy bills and fuel poverty, it makes sense to focus on the EPC rating and possibly also the Primary Energy Factor. In terms of reducing Carbon Emissions, it makes sense to have a focus on the EIR.

It may also be sensible to consider an approach which allows a combination of improvements to these metrics, for example, properties in off grid areas traditionally score poorly in terms of EPC rating (EER) due to the fuel cost factor that is present in this metric. Even when installing or using a renewable, such as an ASHP, the EPC rating is impacted using electricity to fuel the heating system. However, the EIR will be much higher due to fact that the heating is considered low carbon, and the lowering of the carbon factor for electricity.

Likewise, the primary energy requirement of a property would change markedly if the insulation at an off grid/non-gas property were improved, but the EPC rating would still be negatively affected by the fuel cost.

Therefore, it would make sense to allow the EIR and/or Carbon Emissions, along with primary energy to have weight when considering policy decisions.

Question 6: Do you agree with the government’s preferred policy scenario of requiring ‘new tenancies’ to reach EER C from 1 April 2025 and ‘all tenancies’ to reach EER C by 1 April 2028? If not, do you have alternative suggestions; please provide evidence with your answer.

Stroma Certification is in support of the proposal, and believe the phased approach works well. We also feel the timeline suggested gives enough time for Landlords to make improvements to their properties to get them to the preferred standard.

It is key for all stakeholders to fully understand the regulations and that compliance with them is likely to require a whole house approach, so it is essential that PAS 2035 is incorporated into the regulations. Otherwise, landlords will be inclined to install measures separately, which could introduce unintended consequences, ignore the need for sufficient, future proofed ventilation and correctly sized/appropriate heating systems and ultimately could cost the landlord more in terms of outlay, whilst still not achieving the required outcome.

To that end, education for all stakeholders, with suitable guidance, advice and signposting to these is absolutely key.

Question 7: Do you agree with increasing the cost cap to £10,000 inclusive of VAT as our preferred policy proposal? If not, please explain why not and provide evidence with your answer.

Stroma Certification are in support of increasing to cost cap to £10,000 – during the first phase of MEES, once introduced, the cost cap of £3,500 appeared to work well as it provided clarity to landlords and prevented many no cost exemptions. The data in the impact assessment does suggest that this is a sweet spot in terms of number of properties that can be improved to EPC band C within that cap.

Question 8: Should the £10,000 cost cap be adjusted for inflation?

The cost of improvement is likely to increase along with inflation, and cost of rent is likely to mirror this too. Therefore, we feel the cost cap should also be adjusted in line with inflation as appropriate.

The cap should be reviewed periodically, in line with other considerations, such as the cost of new technologies and cost of existing measures becoming cheaper over time, as a result of economies of scale and improvements to installation techniques etc.

Question 9: Should a requirement for landlords to install fabric insulation measures first be introduced? If yes, when, and how should such a requirement be implemented? If no, what are the alternative installation methods that maximise energy efficiency outcomes? Please provide evidence to support your answer

Yes, a fabric first approach should be taken as this is fundamental to ensuring that the property is ‘retrofit ready’ and future proofed, including a focus on ventilation.

The most logical way to do this to implement PAS 2035 as the process – it is designed with fabric first in its approach. One of the outcomes of PAS 2035 via an onsite Retrofit Assessment is advice and a medium-term improvement plan. If each property had a plan in place, then careful considered and timely improvement works could be implemented, following the PAS (2035 and 2030) with a monitored result. An updated EPC should be completed following improvement for the landlord to claim compliance with the regulations, and for the collective improvements across the housing stock to be analysed by government and other stakeholders.

Time needs to be given to allow Landlords to save the money to install these measures. As an example, if a Landlords stock comprises of solid/stone walls, this may be expensive.

There should be an increased focus on fabric first based funding mechanisms and drawing attention to the most important improvements. An updated/sectioned set of recommendations on the EPC (Fabric Upgrades on the EPC in a highlighted fashion) would seem logical.

Question 10: We would welcome views on the alternative of a dual metric target to reach both EER Band C cost metric and also EIR Band C carbon metric, with an increased cost cap of £15,000 inclusive of VAT.

As noted in our response to Q5, Stroma Certification feels that the EPC should give equal footing to the metrics of Cost/EER, Carbon and Energy Requirement/Primary Energy. This is especially important in off-gas grid properties where the fuel cost of electricity, oil and LPG is prohibitive to the EPC rating (EER).

The direction of travel in general is towards non-fossil fuel sources, primarily Heat Pumps, and the government has indicated its ambition to have 600,000 heat pumps installed by the latter half of the decade.

The EPC rating should remain as it is; a way of indicating the efficiency and cost of running a dwelling, as this helps with fuel poverty policy, however we need to better include, incorporate and reward properties which achieve better results in the other metric areas – particularly for carbon.

Stroma Certification cannot effectively advise on whether increasing the cost cap to £15,000 would promote greater improvements in properties that are going to cost more than £10,000 to improve to the standard. We are somewhat wary of increasing costs to beyond what a landlord could afford (especially those with larger portfolios of mainly older, solid wall properties). If affordability is compromised too much, many Landlords may seek to find ways to qualify for exemptions which may have a reverse effect on the success of the regulations. Stroma Certification is however favourable of allowing such landlords the ability to improve properties up to the cost cap (whatever this is set at) and get credit for improvements in other metrics, especially carbon, as this is so key to the UK’s future strategy and commitments.

Question 11: Should government introduce an affordability exemption? If so, we would welcome views on how such an exemption should be designed and evidenced, and any potential impacts on the PRS market.

When the first phase of MEES was introduced, a zero-cost exemption was allowed. Every property that couldn’t obtain funding from the various incentives and grants available were instantly exempt, if evidence could be provided. We must avoid a similar, easy to exploit exemption route.

Stroma Certification is a member of PEPA, who have recently created an exemptions scheme operating framework, which is designed to ensure that exemption evidence is complete, robust, clear and accurate, and can only be uploaded to the exemptions register by a competent and certified person. Stroma suggests that government investigate this as an option to ensuring that exemptions are quality assured and can be relied upon.

Question 12: What should the eligibility criteria be for an affordability exemption if it is introduced, and how can the criteria accommodate fluctuations in a landlord’s finances and/or in the value of a property? Please provide evidence to support your answer. Improving the energy performance of privately rented homes 19

Stroma Certification would suggest that the only exemptions relating to affordability should centre around landlords with a high number of properties with high-cost measures (i.e. where all properties would require the full cap in order to improve to EPC C).

Having said that, given the anecdotal evidence that suggest that MEES and EPC ratings are already impacting on house valuations, it is likely that landlords, may benefit from lower purchase prices or at least be able to negotiate lower purchase prices to be able to afford the improvement works.

Stroma Certification would also refer the reader back to our previous answer to Q11, relating to the exemptions register and certification of competent people, capable of assessing and producing MEES exemption evidence.

Question 13: Should we incorporate TrustMark into energy performance improvement works? If not, please explain why not and provide evidence with your answer.

Yes, this is already in place via PAS 2035.

Question 14: What role can the private rented sector play in supporting the rollout of smart meters and what are the barriers and possible solutions to achieving this?

Stroma Certification are not best placed to advise on this question. However, the current EPC methodology does not distinguish between older meters and smart meters but focuses on the tariff meter type. One suggestion we can provide is that some sort of notification on the EPC is put in place to show that the property has a smart meter.

Question 15: We would welcome views on whether the PRS Regulations may need to be tightened further for the 2030s? Please provide evidence with your answer.

It is hard to say what the landscape will look like in the 2030s from where we are now. 10 years ago, Stroma Certification firmly believed we would be building homes that were considered net zero, and this hasn’t happened.

We need to set targets that a challenging but achievable and ensure there are mechanisms and capabilities in place within the wider industry to achieve those goals. We also need to be brave and not waiver from these targets by ensuring that they are set in law and are robustly enforced.

If we can do that, then reviewing what we do in 2030 will be easier to do earlier in the timeline.

A final point would be that we should not simply consider EPC C as success. The bottom end of the C bracket is a 69 rating on the EPC, and these properties still require a lot of energy and emit many tonnes of carbon over their lifetime.

We should also commit to ensuring that new properties build now and in the future meet future MEES as a bare minimum, and this certainly not the case currently. They should also meet fabric requirements to ensure they don’t need to be upgraded again in order to be capable of utilising renewable heating sources (renewable ready). We should also avoid the temptation of putting PV on properties to comply with MEES, whilst the fabric performance is still not future proofed. So, future incentives should avoid this, and MEES needs to consider this.

Stroma Certification would also point to PRS legislation such as Sections 8 and 21 which need to equality protect landlords and tenants, need to be carefully adapted to endure that MEES regulation aspects are featured.

Question 16: What are the other steps government could take to increase awareness and understanding of the PRS Regulations?

A compelling, clear and informative publicity campaign is required, which sells the benefits of the regulations to all stakeholders (Landlords, tenants, agents and legal representatives).

Energy Assessors and Energy Professionals are key to giving timely and accurate advice to stakeholders and we need to empower these individuals to give this advice.

As noted previously, we also need to see robust compliance and a competency scheme for exemptions to ensure that the regulations are met correctly and not bypassed.

The existing guidance documentation for tenants and landlords needs to be updated in good time, prior to the launch of the regulations, which a simple and clear summary of the ‘heads of terms’ would be improve key understanding within stakeholders. Also appreciate that tenants should be pushing for this from their landlords and harness their ‘buying power’ where possible. Landlords who improve their properties to be as efficient as possible should also benefit from minimal void periods and high rental fees. We recognise this is very much dictated by supply and demand, however.

Question 17: Is the introduction of a PRS property compliance and exemptions database necessary to help local authorities to proactively enforce minimum energy efficiency standards? If yes, should we include the per-property registration fee within the cost cap? If not, what alternatives to a PRS property compliance and exemption database would you suggest?

Absolutely, this is hugely important to the success of the regulations.

The cost of registration should be included in cap as per suggestion - £30 is not a huge chunk out of the cap and could be seen as a small sweetener for landlords.

Question 18: Do you agree that government should set a maximum total registration fee for landlords with a very large portfolio? If yes, how many properties should qualify as a “very large” portfolio? What should the maximum fee be? If you do not agree to a maximum total registration fee proposal, do you have alternative suggestions?

Stroma Certification cannot comment on this question.

Question 19: Should government seek primary powers to place a requirement on letting agents and online property platforms to only advertise and let properties compliant with the PRS Regulations? If not, please explain why not and provide evidence with your answer.

Yes, only properties that meet the regulations should be allowed to be advertised.

Question 20: Should government remove the seven to twenty-one day exemption period on landlords making all reasonable efforts to provide a valid EPC prior to a property being marketed or let? If not, please explain why not and provide evidence with your answer.

Yes - there are hardly any reasons for an EPC not to be done in time for the marketing of a dwelling.

There are no issues with supply within the EPC market, given that there are over 12,000 certified energy assessors who are currently practicing. The market has delivered over 2 million EPCs per annum in previous years and there is capacity for similar numbers now.

The central EPC register needs to make it easier for landlords to find assessors in their local area, if needed, by specifying if an assessor is a DEA (rather than a SAP assessor) but this is a not a huge issue and is easily overcome.

Question 21: Should government increase the level of the fixed civil penalty fine for offences under the EPB Regulations (currently set at £200)? If yes, how high should the fine be?

Yes – the current fine is far too small and hardly ever issued. It is therefore offering zero deterrent to those who fail to market their properties in line with the law.

There needs to be a wholesale change to the way compliance and enforcement is handled for EPBR. Currently funding for enforcement is derived from part of the EPC lodgement fee paid to the government. This money however is not ring fenced and it is highly unlikely that any of this funding is used to enforce the regulations. The funding needs to be ring fenced and fines raised should be fed back into the process and collected to aid quality assurance processes in the industry, for the betterment of the EPC.

Fines should either be set at a sufficiently high figure to provide a deterrent, and certainly should be higher than an average months' rent in the UK, and Stroma would suggest £1,000 or consider multiples of months' rent (for serious non-compliance for example) for the Landlord and/or letting agent. It would be extremely motivating if both stakeholders were fined.

As a side note, PEPA have been running a small-scale whistle blowing process for energy assessors to highlight EPBR non-compliance. PEPA write to the agent where known or property owner, and normally a single letter is enough to prompt corrective action.

Question 22: Should government enable LAs to inspect properties for PRS compliance? If not, please explain why not and provide evidence with your answer.

Yes, this would provide a further deterrent.

Question 23: Should government permit local authorities to use EPC Open Data for some phases of PRS enforcement? Please provide evidence with your answer.

Yes - LAs could tackle the very lowest performing dwellings in their catchment area as well as comparing this information with properties being marketed for rental. A joined-up approach of this kind is vital to ensuring compliance is driven up.

It is imperative that the open data available is as up to date and complete as possible. The current cycle for updating this data is 3 months, and this would hinder such activity, especially if the property has not had an EPC before, or the previous EPC has expired and would force the LA to refer back to the EPC register. This would slow the process down.

Stroma Certification strongly advise that the Open Data is updated each month as a minimum, or ideally in real time. This may be possible now that the EPC register is controlled by government under a .gov website.

The dataset should also be expended to include all data points used in the assessment, and not redacted as is currently the case. When originally set up, there was concern that making all data available would have GDPR implications and this should be reviewed now that the data is wholly located on a government website.

Question 24: Should there be a requirement for post-improvement EPCs (and for the cost to be included within the cost cap)?

Yes - so the new work is reflected on the register, especially if timely open data is to become reality. There are many benefits to the wider piece of having accurate, up to date and reliable data on the EPC register and introducing a post improvement EPC is a key part of making sure that landlords have improved properties to the minimum standard, can claim compliance and to allow all stakeholders and interested parties have the most up to date information available. This is doubly important when we consider that validity periods of EPC’s remain at 10 years.

If the cost is included within the cap it may lead to an unintended consequence of EPC’s being charged at high value to reduce the cost of installing measures. This could open to floodgates to serious abuse.

Question 25: Should a valid EPC be in place at all times while a property is let?

Yes, this is essential to ensure that all stakeholders and interested parties have access to and are aware of the EPC.

Question 26: How can the most consistent set of recommendations in the EPC be assured? Does using only the most recent SAP methodology allow this? Improving the energy performance of privately rented homes 20

Stroma Certification recommends the following.

1) Trigger points that require an EPC to be updated when significant changes occur at the property that significantly impact the energy performance. Examples include, envelope changes and sizes, floor area changes (extensions) and HVAC changes

2) Where changes occur, particularly those that require building control sign off (including self cert by a CPS installer), the evidence of these changes (including specifications such as insulation thickness, u-value calculations, windows/doors u-values, heating design specifications etc), should be stored online, and made accessible to the energy assessor. This way, key evidence is not lost and assumptions within the methodology are not used. This will improve accuracy, repeatability and thus produce correct and consistent recommendations.

3) Reduce the validity period for EPCs to 3 years to ensure that onsite inspections occur regularly.

4) Ensure that the reason for an EPC (the transaction or trigger) is noted on the EPC and ensure these triggers are up to date when they come into being. This will allow any viewer of the EPC to understand the original purpose of the EPC.

The only way would be to have the EPC in its new guise (URL based EPC) changed to a dynamic EPC which changes with each release of Appendix T. Stroma do not believe this would be a good solution and would be likely to cause many complaints as the data/output that was ‘lodged’ at the time would be subject to change.

Question 27: Should listed buildings and those in a conservation area be legally required to have an EPC?

Yes – by mandating that all properties require an EPC will remove any confusion completely. Tenants of listed and protected buildings deserve to have access to an EPC that informs them about the property they live in, and any prospective tenant of a listed building should understand the costs and performance of any building they have an interest in.

There are many property improvements that can be made to listed buildings – and many of these properties are the worst performing from an energy and carbon perspective. It makes no sense that these buildings are currently not required to have an EPC. The current situation is confusing legally, and certification schemes have long been required to interpret the law and provide guidance and interpretation.

Without inclusion, listed and protected buildings risk being left behind in terms of energy performance. We need to measure it, in order to improve it.

Question 28: Should government seek primary powers to increase the maximum fine level to £30,000 per property for each breach of the PRS Regulations? If yes, should it be adjusted for inflation? If not, what would be an alternative, appropriate maximum fine level? Please provide evidence with your answer.

Stroma Certification have no issues with the maximum fine – we see the benefits in putting in place a strong deterrent for non–compliance. As with previous comments we feel the fine should be adjusted in line with inflation.

This action however must be complimented by clear and timely guidance for the industry along with incentives to assist landlords to help them meet the standard.

Question 29: Should government introduce powers for tenants to request that energy performance improvements are carried out where a property is in breach? If yes, how could a redress mechanism be devised?

Yes.

This was covered in the original MEES regulations, and there should be a period prior to implementation where a tenant can request improvements to the dwelling. An EPC mut be in place at this point.

Ultimately, if the regulations work and compliance is enforced then a property shouldn’t be rented out that doesn’t meet the minimum standard.

Question 30: Should government introduce some form of local authority disclosure or benchmarking where a property is in breach of PRS Regulations?

Yes.

Question 31: Do you agree that the updated exemption regime should come into force on 1 April 2025? If yes, do you agree that the property compliance and exemptions database should be opened six months prior to commencement of exemptions? If not, please explain why.

Yes and Yes.

A smoother transition prior to April 2025 would enable those who wished to register exemptions prevents a last-minute outcome.

See our previous comments on how an exemption lodged to the register can be performed by competent people, with standardised evidence which can be quality assured.

Question 32: Should the ‘new landlord’ temporary exemption be simplified so that it applies to any person who has become a landlord within the last six months? Please provide evidence with your answer.

Yes

Not having an exemption could push prospective landlords away and risk affecting supply of new rental properties entering the PRS market. Six months is a reasonable timescale for the landlord to review and improve the property, post purchase. This must be disclosed in the marketing material so that prospective tenants are aware that improvements will be needed in this time frame.

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