UK Government Scraps Energy Efficiency Targets for Rentals

Prime Minister Rishi Sunak has scrapped or diluted many of the government’s critical net zero carbon targets in a rehash of his government’s green commitments.

For landlords, his change of mind means controversial energy efficiency targets for private rented homes are off the table.

In a speech from 10 Downing Street detailing the government’s U-turn on green policies, Sunak pledged net zero by 2050 is still his primary target. Still, he considers the current route too expensive for landlords and homeowners already struggling financially with a soaring cost of living and high mortgage interest rates.

The speech touched on several policies involving cars, boilers and private rented homes.

What is net zero?

Net zero refers to carbon emissions. A country has reached net zero when no greenhouse gases emanating from human activity, like carbon dioxide - are pumped into the atmosphere.

Energy Performance Certificates (EPC)

The government had planned that privately rented homes should have a minimum EPC  C-rating by April 2025, and all tenancies should be covered by April 2028.

However, studies have warned that 1.7 million of England’s 4.2 million privately rented homes could never reach this level of energy efficiency.

The cost of bringing rented homes up to a C-rating is estimated at up to £10,000 per property.

But the prime minister has cancelled the plan, saying: 

“We will never force any household to spend this money.

“Energy efficiency is crucial to making our homes cheaper to heat, but under current plans, some property owners would have been forced to make expensive upgrades in just two years.

“That’s just wrong. So those plans will be scrapped while we will subsidise energy efficiency.”

The change of mind means current EPC rules will continue to apply to buy-to-let homes - so landlords may rent out homes with an E-rating or above from 2025.

Read government guidance on EPC ratings for landlords.

Boilers

Sunak is keen to encourage landlords and homeowners to switch from gas boilers to heat pumps. The plan to start phasing out fossil fuel boilers by 2026 is pushed back to 2035 and is expected to cover about one in five homes.

Grants for installing heat pumps rise from £5,000 to £7,000

"There are no strings attached - the money will never need to be repaid," he said. "We'll never force anyone to remove their existing boiler and replace it with a heat pump.”

Cars

Plans to end the sale of petrol and diesel cars by 2030 are pushed back until 2035, although the ban only applies to new vehicles, not second-hand ones.

Sunak said he recognised the upfront costs of changing to electric vehicles are high but wants drivers to choose what type of car they drive rather than be forced by the government.

However, the prime minister still expects most cars sold from 2030 will be electric.

Recycling and other green policies

Sunak promised to scrap a range of green policies under discussion in Westminster.

They include car-pooling, a tax on meat, any taxes that discourage flying or going on holiday and a ban on new oil and gas drilling in the North Sea.

He said banning North Sea exploration would make the UK more reliant on expensive fuel from overseas.

Lastly, the prime minister rubbished proposals from some councils to make householders recycle with up to seven bins, explaining the government would never force people to do so.

Read Prime Minister Rishi Sunak’s full net zero speech.

Comment

As well as running the Guild, we are also private landlords. The announcement won't change anything for us, and we will continue to invest heavily in energy efficiency improvements to achieve a C rating whenever a property becomes empty naturally. Our view is that energy efficiency is an essential factor for tenants taking one property over another. Furthermore, an energy-efficient home reduces the likelihood of condensation buildup, and good tenants stay longer because the property is affordable to run.

Thirty years ago, everyone wanted showers over baths; then it was high numbers of electrical sockets in every room, then wooden flooring, and now it's energy efficiency. We are simply in a new trend where, over time, only energy-efficient homes will be lettable because there will be so many up to good standards, and it's what the next generation of renters will want. It doesn't need legislation to make this a reality.

A new government could easily bring this back quickly, whether that be England or Wales!

Bank of England Interest Rate Decision

In a surprising turn of events, the Bank of England has decided to leave the interest rates unchanged despite expectations of a rise from 5.25% to 5.5%. This decision represents an unexpected departure from the previous 14 decisions where the Bank chose to increase the rate, beginning at the end of 2021.

According to the Bank of England Governor Andrew Bailey, the rationale behind this decision is the recent significant drop in inflation. 

"Inflation has fallen a lot in recent months, and we think it will continue to do so," he said. Interestingly, this drop in inflation occurred despite the rising petrol and diesel prices, with inflation recorded at 6.7% in August, a surprising fall from July's figures.

The rise in the base rate is known to lead to more expensive mortgages designed to curb consumer spending and control inflation. However, this recent decision indicates a possible shift in economic strategy. Chancellor Jeremy Hunt suggested, 

"We are starting to see the tide turn against high inflation."

Moving forward, these economic trends and decisions will directly impact landlords and letting agents. Therefore, it remains crucial for stakeholders in the residential property market to stay updated.