The Minimum Energy Efficiency Standards (MEES) Bill passed its first reading last month as part of the push to make the UK's property 'Net Zero', and will be debated in October ahead of its second reading.
Geospatial technology company Kamma has released their analysis which estimates that 2.9 million privately rented homes (65% of those on the EPC register) are below the Government target energy efficiency grade C.
With 2.9 million homes needing to improve, and an estimated average cost of £9,872 per home, the total bill facing the sector could hit £29 billion. While an enormous cost, this could cut emissions by 2.8 million tonnes a year.
Kamma CEO Orla Shields explained:
“The bill itself is a hugely important step in the right direction: it’s right to target poorly performing housing stock at this crucial time in the fight against climate change. More consideration needs to be given, however, to who and how this is going to be paid for. An increase in minimum EPC from E to C is a dramatic rise and landlords won’t see any short-term benefits from lower fuel bills. Government policy is all stick and no carrot at this point.”
Exemptions to the requirements are yet to be finalised, but it seems likely that they will be based on existing models - creating loopholes. For example, landlords under the current minimum rating of E need to invest only up to a maximum of £3,500, which means 120,000 rental properties can still be let out despite being below an E rating. Similarly the ‘all improvements made’ exemption qualifies an additional 1,000 that have run out of viable upgrades.
The obvious challenge is that both these categories of exemption will cover far more properties as the MEES is raised. The increased cost associated with increased targets means an additional 2.1 million properties could qualify as exempt, or 73% of the PRS.
One proposal would see the maximum investment increase to £10,000 but this would deliver a huge affordability challenge to the market and create an incentive for non-compliance.
There are currently 3% of rental homes below the current MEES rating of E but this number is also expected to rise dramatically when the new minimum becomes a C.
This either leaves 2.8 million tonnes of emissions from UK homes still pumping into the atmosphere each year, leaving a hole in the Net Zero strategy for property, or punctures a huge hole in landlord pockets, who may then decide to either not comply or leave the sector.
It also raises the question of fairness as it penalises landlords that have properties in-line with the market average of EPC D and therefore a cheaper route to C, whilst landlords of the worst performing properties quickly hit a cost ceiling.
As Shields continued:
”Leaving landlords without incentive or support, but with loophole opportunities to avoid these targets is a dangerous approach.
“It’s vital that policy is able to strike the right balance. Poorer performing properties should be targeted for improvement and the entire sector supported to get there.”
