Net Zero Plans: Still No Clear Guidance for UK Landlords

 

earth in water COP28

 

In the dynamic landscape of the UK property market, iHowz stands up for the landlord community. iHowz continues to call for support and guidance for those navigating the intricate matrix of regulations and standards. In its unwavering commitment to addressing the evolving challenges faced by property owners, iHowz has been at the forefront of advocating for landlords’ interests, particularly in the realm of energy efficiency standards.

The labyrinth of requirements surrounding the Energy Performance Certificate (EPC) and The Minimum Energy Efficiency Standards (MEES) has left many landlords grappling with uncertainty about the future. Moreover, the constant shifts in future objectives and subsequent retractions only serve to compound the perplexity. As the echoes of COP28  fade away, they leave in their wake a resounding global call for sustainability, iHowz persists in its appeal for transparent and succinct UK government directives.

Regardless of your stance on climate change and the broader net zero initiative, there is little doubt that the outcomes of COP28 will have some ongoing ramifications that will extend to UK landlords. Therefore, let’s plunge into this ‘hot’ topic and seek clarity on the historical, current, and potential future landscape of energy legislation.

Index of Content

 

What are the Implications of COP28 for UK Landlords?
A Brief History of Global Climate Agreements
The UK’s Climate Change Policies
The Impact of Climate Change Policies on UK Housing
The Energy Performance Certificate (EPC)
The Minimum Energy Efficiency Standards (MEES)
How are we Doing?
The Government Future Proposed Energy Criteria
Rishi Sunak Abandons Changes to the MEES Rules
Breaking News: Interesting Update – The Home Energy Model!!
Energy Solutions for the Private Rented Sector and Other Tenures
The Economic Case for Energy Efficiency
Navigating Challenges: Landlords’ Concerns with the Current EPC Regime
Brief History of iHowz’s Campaign for Clear Guidance on Energy Requirements for UK Landlords
iHowz’s Ongoing Campaign to Unlock the Path to Sustainable Homes
Conclusion

 

What are the Implications of COP28 for UK Landlords?

 

From November 30 to December 12, 2023, Expo City Dubai took centre stage as it hosted the 28th Conference of the Parties to the UN Framework Convention on Climate Change (COP28). Almost 200 countries joined forces, leading a global charge in pursuit of bold, practical, and ambitious solutions for our planet’s most urgent challenge. As COP28 concludes, a statement has been issued, firmly committing to the phasing out of fossil fuels to reduce carbon emissions to net zero.

Dubai COP28 net zeroCOP28 has left us in a state of inquiry, raising more questions than answers. Consider this: How will the pledge to phase out fossil fuels and attain net-zero carbon emissions affect the energy efficiency standards expected of UK landlords? Given the commitment to slash global emissions by 43% by 2030, will Rishi Sunak accelerate the imperative for housing upgrades to meet these demands? And could we be on the brink of witnessing a complete overhaul of the Energy Performance Certificate (EPC) and Minimum Energy Efficiency Standards (MEES)?

iHowz warns of the conspicuous absence of explicit and unified guidance for UK landlords. The imperative shift toward net zero in the UK requires immediate consideration, yet the lamentable shortfall persists in the form of a total lack of a sturdy support plan. The call for clarity intensifies as we navigate these critical junctures, underscoring the pressing need for a comprehensive roadmap for landlords amid the transition to net zero.

 

 

A Brief History of Global Climate Agreements

 

Embarking on the quest to combat climate change began in the early 1990s, evolving into a longstanding discourse. In 1992, the international community adopted the United Nations Framework Convention on Climate Change (UNFCCC).  The ultimate aim of this accord was to prevent dangerous human interference with the climate system.

tree in light bulb net zeroAs time passed, nations came together to establish crucial, international climate change agreements. The most notable are The Kyoto Protocol (1997) and The Paris Agreement (December 12, 2015). These accords signify vital strides in the joint effort to address the challenges presented by climate change.

The Paris Agreement was a landmark in the multilateral climate change process, marking the first time all nations collectively committed to combatting climate change. The agreement sets ambitious temperature goals, aiming to limit the increase in the global average temperature to well below 2 degrees Celsius above pre-industrial levels, with efforts to pursue a more stringent limit of 1.5 degrees Celsius.

In essence, the Paris Agreement conveys a message of unity, urgency, and shared responsibility in the face of a global environmental crisis.

In 2018, the international scientific consensus emphasized a critical mandate: global net human-caused CO2 emissions must decrease by 45% from 2010 levels by 2030 to avert severe climate damage. The ultimate goal is to achieve net-zero emissions by 2050. This imperative timeline emphasizes the urgency and collective responsibility in pursuing a sustainable and resilient future.

 

The UK’s Climate Change Policies

 

The UK’s journey in climate change policy is a dynamic saga that gained momentum over the years. Initially, early policies focused on awareness and international cooperation. This culminated in the Climate Change Act of 2008. The act set legally binding targets to reduce greenhouse gas emissions. It created a pathway to achieve an 80% reduction by 2050, using 1990 levels as a baseline. The Act also introduced a system of carbon budgets, outlining specific emission limits for five-year periods, and ensuring accountability and transparency.

small house held in hand with wind turbine COP28Over the next decade, ambitious policies unfolded, including promoting renewable energy, phasing out coal, and fostering energy efficiency. The UK’s commitment was further solidified with the declaration of a “net-zero by 2050” target in 2019. Furthermore, the UK has agreed to aim for a 68% carbon reduction by 2030. A target that it is unlikely to meet as things stand.

On the World Stage, the UK became a leader in addressing climate change issues. The UK is also a leader in producing offshore electricity. Indeed, according to the UK Government Energy Trends, 42.1% of electricity came from renewables in 2023.  However, climate advisors are beginning to voice concerns that progress is ‘worryingly slow’ and the UK is far from meeting its set climate goals.

 

The Impact of Climate Change Policies on UK Housing

 

Navigating the shifting climate policies and evolving timeline goals has become a nightmare for UK landlords. Compounding this problem is that the UK boasts some of the oldest housing in Europe. According to the Home Builders Federation, 78% of  UK homes were constructed before 1980, surpassing the EU average of 61%. In addition, 38% of the UK’s housing stock predates 1946, exceeding the EU average of 18%.

According to Jake Massey from ‘Which’, “heating homes account for 17% of UK carbon emissions and 85% of UK homes are still heated by a natural gas boiler.” Thus, the UK faces some unique challenges in meeting certain governmental criteria.

So, let’s take a look at some of the criteria. Two important interlinking concepts for all UK landlords and tenants to understand are:-

  • The Energy Performance Certificate (EPC)
  • Minimum Energy Efficiency Standards (MEES)

 

The Energy Performance Certificate (EPC)

 

An Energy Performance Certificate (EPC) assigns a property an energy efficiency rating from A (most efficient) to G (least efficient). An EPC is valid for 10 years. The EPC also provides insights into the anticipated heating and lighting costs, along with estimated carbon dioxide emissions. Additionally, the EPC suggests potential improvements to enhance the energy efficiency rating, offering cost-effective strategies for achieving a better score.

Historically, assessors had the flexibility to conduct an assessment without necessarily lodging it, providing a preliminary indication of potential improvements. However, the government has discontinued this practice.

During the EPC assessment process, it is crucial to communicate to the assessor whether the property is listed and/or located in a conservation area. This information significantly influences the final report and can streamline the exemption application process.

It’s important to acknowledge that Energy Performance Certificates (EPCs), in their current form, can be considered somewhat blunt instruments. This is a result of the need for generalization to maintain affordability. A comprehensive energy assessment, such as a SAP rating, provides a more detailed evaluation but tends to be more expensive.

Worth noting is that Elmhurst is actively addressing these limitations through an ongoing campaign. For landlords seeking to enhance their properties, it is recommended to adhere to current guidance.  As of now, the prevailing advice is to opt for gas heating rather than electricity. However, it is crucial to stay vigilant, as recommendations may evolve in the future. Keep abreast of industry updates and regulatory changes to ensure property improvements align with the latest standards and best practice

 

The Minimum Energy Efficiency Standards (MEES)

 

The Minimum Energy Efficiency Standards (MEES) represent a key objective within the Clean Growth Strategy, aspiring to enhance the energy performance of private rented homes. Implemented on April 1, 2018, MEES became effective, compelling all properties available for letting or sale in England and Wales to attain a minimum EPC rating of ‘E‘ or higher. A landlord can not rent a building with an energy rating of F or G unless an exemption is approved.  Starting April 1, 2020, these standards extend to encompass all existing tenancies, not limited to new agreements or renewals. The goal is to upgrade as many properties as feasible, cost-effective, and affordable to, at least, EPC Band C by 2030.

 

How are We Doing?

 

According to The English Housing Survey (2021-2022), there’s been a notable increase in the proportion of dwellings house and energy score zero netachieving the highest SAP Energy Efficiency Ratings (EER). Housing in the A to C bracket increased from 16% to 47% between 2011 and 2021. Simultaneously, the proportion of residences in the lower E, F, and G bands experienced a significant decline. Encouragingly,  2021 saw band E housing plummet from 26% in 2011 to just 7%.  In 2021, a substantial 87% of dwellings found themselves in the more energy-efficient EER bands of C and D, an encouraging shift from the majority residing in the D and E bands back in 2011.

The Government’s Future Proposed Energy Criteria

 

In 2020, the government kicked off discussions to fortify the Minimum Energy Efficiency Standards (MEES), considering impactful changes. The proposed alterations include:-

  • To elevate the minimum EPC rating from E to C by April 1, 2025, for new tenancies
  • To extend to existing tenancies by April 1, 2028.
  • To increase the cost cap from £3,500 to £10,000 per property.
  • Introducing a fabric-first approach: The order of improvements prioritizes building fabric enhancements like insulation, windows, and doors before other measures such as new heating systems.

Anticipating these MEES enhancements and aiming to spread the financial burden, numerous landlords have proactively invested in boosting the energy efficiency of their properties. Some have even taken extraordinary measures, like selling their properties, as making the required improvements posed financial or practical challenges.

 

Rishi Sunak Abandons Changes to the MEES Rules

 

In a speech on September 20, 2023, addressing a renewed approach to achieving net zero, Rishi Sunak disclosed the abandonment of proposed changes to the Minimum Energy Efficiency Standards (MEES) rules, effectively removing the deadline for property upgrades. While landlords are still encouraged to prioritize energy efficiency measures, all rental properties will now only need a minimum Energy Performance Certificate (EPC) rating of E to be let, except for those that qualify for exemptions.

rishi sunak net zeroDespite the shift in MEES rules, the government’s commitment to supporting energy efficiency remains intact. Revised plans include a notable 50% increase in the Boiler Upgrade Grant, now standing at £7,500. This enhanced grant aims to assist households in transitioning from gas boilers to low-carbon alternatives, such as heat pumps.

Furthermore, the ban on installing oil and LPG boilers, along with new coal heating, for off-gas-grid homes has been postponed to 2035. This deviates from the original plan to initiate the phase-out in 2026. Notably, an exemption has been established for gas boilers, allowing households facing challenges in transitioning to low-carbon alternatives to remain exempt from the switch until 2035.

As these policy changes unfold, questions arise about the reasons behind the U-turn. Could it be a response to a potential exodus of landlords from the private sector? Does the Prime Minister possess insider information about forthcoming energy requirements not yet released to the public? Or is it an acknowledgement that the initial objectives were deemed unattainable? Are we heading for yet more changes following COP28?  While these speculations linger, only time will reveal the true motivations behind this policy adjustment.

 

Breaking News: Interesting Update – The Home Energy Model!!

 

In response to the inquiry raised earlier – does the Prime Minister hold advanced knowledge about upcoming energy requirements not yet disclosed to the public? – we can unveil breaking news! The day after the COP28 summit drew to a close the UK government released it’s proposal for a Home Energy Model: Future Homes Standard Assessment.

The UK government has launched a public consultation for the proposed Home Energy Model, intended to replace the existing Standard Assessment Procedure (SAP) rating for assessing home energy performance. SAP is currently used in building regulations, Energy Performance Certificates (EPCs), and policy evaluations.

The Home Energy Model, designed by the Building Research Establishment (BRE), is considered better suited for decarbonizing the housing stock. It aims to set standards for new homes to be “zero carbon ready” and compatible with green technologies. The model features higher time resolution, supports smart technologies, and is open source, allowing for transparency and industry collaboration.

The public consultation, open until March 6, 2024, encourages stakeholders to provide insights for an effective final design. Gillian Charlesworth, CEO of BRE, underscores the model’s significance in achieving net zero and urges stakeholder participation. (See iHowz’s article: New Version of EPC being Investigated).

 

Energy Solutions for the Private Rented Sector and Other Tenures

 

In the quest for low-carbon heating, diverse solutions have emerged within the Private Rented Sector (PRS) and other tenures. Throughout this evolution, there has been a notable progression of innovative technologies. As a UK landlord or tenant, you may wish to consider implementing some of these measures to contribute to the transition. Below is far from an exhaustive list, of potential future measures to think about:-

 

Lighting Heaters and Boilers

 

  • Energy-efficient LED lighting: Energy-efficient lighting, known for its substantial 90% energy savings, has phased out traditional incandescent bulbs in favour of LED technology. The ban on halogen bulb sales commenced on 01 September 2019, followed by the prohibition of fluorescent bulbs on 01 September 2023. These regulatory changes mark a pragmatic shift toward environmentally friendly lighting solutions, reducing energy consumption without sacrificing illumination quality.
  • Enhanced standards for electric heaters and domestic appliances. Panel heaters that comply with Lot 20 standards stand out as the most efficient options available. Those bearing the distinctive green Lot 20 logo not only signify compliance with the highest energy-efficiency standards but also ensure, by legal standards, a performance that is dedicated to energy savings
  • Condensing gas boilers compared to traditional counterparts: Research the most energy-efficient boilers before installation. For example, The Bosch Greenstar boilers boast an impressive *AFUE of up to 95% and carry the Energy Star certification. In contrast, conventional boilers typically achieve an *AFUE of up to 80%. This distinction implies that with traditional boilers, up to 80% of the fuel is utilized for heating your home and 20% is wasted. (*AFUE stands for Annual Fuel Utilization Efficiency. The AFUE evaluates a furnace’s efficiency and assesses its capability to convert fuel into heat).

 

Renewable Energy Technologies

 

  • Installation of solar PV and solar thermal: Integrating solar PV for electricity and solar thermal systems for heat energy generation, substantial savings can be achieved. According to The Intergovernmental Panel on Climate Change (IPCC) rooftop solar panels exhibit a carbon footprint approximately 12 times lower than natural gas and 20 times lower than coal when measured in terms of CO2 emissions per kWh of electricity generated.
  • Wind turbines in rural settings for environmentally friendly energy production
  • Battery storage to harness excess energy for peak usage, support distributed grids and power electric vehicles.

 

The Economic Case for Energy Efficiency

 

Undoubtedly, the most cost-effective energy is the energy we conserve. Aligned with the government’s Fabric First policy for energy efficiency, the focus is on creating homes that are draft-free and well-insulated, mitigating issues like cold, dampness, and overheating for occupants.

heat loss diagram net zero

Heat Loss From a Badly Insulated House

Adhering to the MEES requirement prevents properties from becoming stranded assets. Beyond the financial benefits of affordable heating, energy-efficient homes promote overall well-being, reducing health concerns associated with extreme temperatures.

The potential for increased capital values and the transformative upgrade of housing stock, akin to a once-in-a-lifetime opportunity, brings about not just economic gains but also employment opportunities. Lower rents in homes with inclusive bills, especially for houses in multiple occupations (HMOs), result in savings on housing benefits, creating a positive ripple effect across various sectors.

In conclusion, prioritizing energy efficiency through measures like the Fabric First policy and adherence to MEES not only translates into immediate financial savings but also fosters healthier living conditions.

 

Navigating Challenges: Landlords’ Concerns with the Current EPC Regime

 

Landlords currently face several challenges within the existing Energy Performance Certificate (EPC) framework. The cost cap lacks a transparent process, leaving landlords uncertain about its inclusion of previous measures. The EPC inspection methodology introduces a subjective element, leading to inconsistent ratings—such as different ratings for flats on the same floor in a modern block. The assessment’s visual nature does not allow for a more in-depth examination, resulting in assumed states, like the absence of insulation.

Moreover, visual inspections limit the ability to confirm actual conditions, and assessors often resist accepting photo or documentary evidence of past improvements. Additionally, the exemption related to payback periods for costs still mandates expenditure up to the cap before applying, adding to the complexity landlords encounter in navigating the current EPC regime.

Brief History of iHowz’s Campaign for Clear Guidance on Energy Requirements for UK Landlords

 

Over the years, iHowz has been a staunch advocate for addressing landlords’ concerns in the realm of energy efficiency. However, the path toward comprehending both current and future Energy Efficiency requirements appears to be an ongoing challenge.

Peter Littlewood centre net zeroIn October 2021, Mr Peter Littlewood, representing iHowz, corresponded with Mr Sharma, MP, and chair of COP26, seeking guidance on effectively informing landlord associates about enhancing the energy efficiency of their properties. This inquiry was especially pertinent considering the imminent changes to the Minimum Energy Efficiency Standard.

Building on this initiative, in April 2022, Mr Littlewood wrote to Rt Hon Kwasi Kwateng, MP, addressing the proposal to publish the outcome of the consultation into a revised Minimum Efficiency Standards (MEES). The correspondence underscored the challenges associated with formulating a payback period formula and the need for funding support.

iHowz’s ongoing efforts and commitment to engaging with key stakeholders and authorities to navigate the complexities of evolving energy efficiency standards ensure that landlords are well-informed and positioned to meet forthcoming regulatory changes.

iHowz’s Ongoing Campaign to Unlock the Path to Sustainable Homes

 

Our proposals advocate for a comprehensive approach to propel energy efficiency in private rental properties. From offering clear guidance and recognizing past efforts to introducing financial incentives and streamlined planning, these proposals aim to revolutionize the landscape, making net zero homes an achievable and rewarding reality. Let’s delve into the transformative measures that iHowz proposes:-

  • Clear Roadmap: The government must guide the anticipated direction and timeline, aiming for disclosure by summer 2024 at the latest.
  • Enhanced Standards: Publish updated MEES SAP and minimum EPC, with a detailed explanation of the shift away from fossil fuels. (SAP, or Standard Assessment Procedure, is the government’s method for evaluating the energy performance of residential properties. These calculations exclusively apply to homes.)
  • Recognition of Efforts: Acknowledge and recognize previous energy efficiency improvements undertaken by property owners.
  • Financial Clarity: Clearly outline the criteria for recognizing both past and future expenditures, ensuring transparency for cost caps.
  • ihowz logo net zeroCost-Benefit Analysis: Introduce criteria for cost-benefit payback to guide decision-making on energy efficiency investments.
  • Streamlined Planning: Explore options for relaxing planning restrictions and minimizing associated costs for energy efficiency upgrades.
  • Electricity Cost Adjustment: Implement measures to rebase electricity costs, steering away from gas as renewable generation lowers production expenses.
  • Incentives for Challenges: Provide grants for properties that are challenging to treat or deemed non-cost-effective for standard improvements.
  • Tax Incentives: Introduce tax incentives, such as zero VAT and 100% capital expense deductions, aligning with practices in other industries.
  • Reduced Standing Charges: Consider reducing standing charges to incentivize energy efficiency measures.
  • Comprehensive Property Record: Include improvement measures in the property register, adopting a system akin to Building Information Modeling (BIM) for thorough documentation.
  • Tailored Energy Measures: The government releases a checklist outlining measures applicable to differing generic home types. This would offer tailored insights into energy-efficient measures suitable for specific property types

Conclusions

 

As the COP28 concludes, the President of the European Commission, Ursula von der Leyen, states.

“I welcome the successful conclusion of the COP28 UN Climate Conference … It is good news for the whole world that we now have a multilateral agreement to accelerate emission reductions towards net zero by 2050, with urgent action in this critical decade. This includes an agreement by all parties to transition away from fossil fuels. We have agreed on reducing global emissions by 43% by 2030, in line with the best available science, to keep 1.5 Celsius within reach.”

All good in theory but will Rishi Sunak take another U-turn regarding the proposed changes to the Minimum Energy it's not easy being green - net zeroEfficiency rules? Has all government policy gone down the U-bend? What does this mean for UK landlords and the privately rented Sector in general? As we said at the start, there still seem to be more questions than answers. UK landlords are worried and increasingly confused with the ever-changing goalposts that the climate change agenda continues to bring.

The net-zero intention behind the climate proposals may have been made in good faith, however, the practicalities of implementing the changes, whilst maintaining a robust PRS in the UK, may prove a little more difficult.

Former European Commission president, Jean-Claude Junker sums up this dichotomy quite nicely,

“We all know what to do, but we don’t know how to get re-elected once we have done it.”

 

Interested in iHowz?

 

Are you curious about staying informed on legislation affecting landlords? Wondering about the benefits of joining a community tailored for property owners? If you’re navigating the realm of property management and seeking a resourceful community, explore our membership page to uncover exclusive advantages and stay abreast of current issues.

iHowz is a dedicated non-profit organization built by UK landlords, who work passionately for landlords like you. At iHowz, our mission is clear: to be the voice that echoes your concerns in both central and local government, to empower you with the tools to run your businesses seamlessly, and to keep you well-informed with all the latest market insights.

 

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