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We must incentivise landlords and tenants to access energy improvement grants

4 min read

Private renters have been more exposed than other tenures to increased energy costs in the two years since Russia’s invasion of Ukraine.

One in four private renters is in fuel poverty, and 55 per cent of private rented homes have an energy efficiency rating of band D or below, compared to 30 per cent of social housing.

Poor energy efficiency means it costs hundreds, sometimes thousands, of pounds more to keep your home warm. Many of us simply can’t afford to, so put up with cold temperatures in our homes. This has a direct impact on our health – but an indirect one, too, because cold temperatures lead to condensation and mould. The health impacts of poor housing are estimated to cost the NHS £1.1bn per year.

The dynamics of the rental market present a challenge to providing renters with homes that are easy to heat. Most landlords don’t pay energy bills so have no direct incentive to install insulation, while tenants will generally not spend money on someone else’s property, especially when they have little certainty they can live there long term.

Modest regulation has had some success in reducing the number of homes with the worst ratings – bands F and G – from 14 per cent of the private rented sector in 2010 to five per cent in 2022.

But fuel poverty rates in the private rented sector have fallen just four per cent in that time, so higher minimum energy efficiency standards are needed. Unfortunately, three years after consulting on raising the minimum from band E to band C, the government left renters stuck in draughty homes by scrapping the plans.

New insulation has to be paid for and there are grants, such as the Energy Company Obligation (Eco) scheme, available for private renters in fuel poverty. But take-up has been dreadful. Despite making up 36.6 per cent of fuel-poor households, private renters have received just 330,000 Eco grants since the scheme’s launch, or 14 per cent of the total.

While awareness of retrofit grants is limited, the main problem is that tenants have no strong incentive to apply for them. When pressure group Generation Rent surveyed private renters in 2023, half said they were put off from applying by fears of rent rises or eviction following improvements, or the landlord simply saying no.

It is currently too easy for a landlord to capture the value of a grant by either raising the rent to cancel out savings on bills, or evicting their tenant to sell their improved property. Tenancy reforms currently going through Parliament will give tenants some protection from eviction and the ability to challenge rent increases at tribunal, but do not go far enough.

If existing funding is going to reduce fuel poverty among private renters – and simultaneously cut carbon emissions and strengthen the United Kingdom’s energy security – we need better incentives for both landlords and tenants to access it.

This means assuring tenants that the grant will benefit them, by preventing the grant-funded improvements counting towards the rent level set by the tribunal, and protection from a no-fault eviction for six years, so that the tenant can enjoy lower energy bills for a reasonable length of time.

Once tenants’ interests are protected, landlords will need to be compelled to accept funded improvements

Once tenants’ interests are protected, landlords will need to be compelled to accept funded improvements, and that means reviving and enacting the original plans to raise minimum energy efficiency standards to band C.

The growth of the poorly regulated private rented sector has resulted in millions of people living in precarious tenancies, paying more than they should to keep warm, and being vulnerable to ill-health. This doesn’t have to be the case, and political choices can change it. Careful design of the incentives for both landlords and tenants would haul the sector into the 21st century and transform living standards.

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