Energy-efficiency rules threaten to damage the PRS in Scotland

Politicians and industry bodies warn proposed energy-efficiency rules for Scotland will damage the private rented sector (PRS) and hurt tenants.

The Scottish government have proposed plans for all PRS properties to meet EPC Heat Retention Rating (HRR) band C by 2033 and 2028 for new tenancies.

However, the Scottish Conservatives, the Scottish Association of Landlords (SAL), and Propertymark tell Property118 these targets risk being unrealistic and could impose huge costs on landlords and tenants.

Energy-efficiency costs passed on to tenants

A consultation by the Scottish government on the band C targets claims that low energy-efficiency standards are contributing to fuel poverty.

According to the Scottish government, in the PRS, 48% of properties are rated EPC band D or lower, with the sector also having the highest percentage (14%) of EPC band E, F, or G rated properties compared with the social rented sector (5%) and the owner-occupied sector (11%).

The SNP claims that, by improving homes to a band C, this will reduce energy costs for tenants.

However, the Scottish Conservatives warn the opposite will happen, with landlords having to spend thousands of pounds to improve their properties, costs which will be passed onto tenants.

Scottish Conservative shadow housing secretary Meghan Gallacher tells Property118: “The SNP government need to get real.

“Scotland has a housing emergency due to the Nationalists’ cuts to the housing budget and flawed rent control policies. The SNP’s new regulations will only further depress the market by adding huge costs on landlords, which, in turn, will be passed on to tenants.

“We all want to see progress to net zero, but it has to be an affordable transition. The SNP can’t keep adding to the cost of household bills, especially when they’ve already made Scotland the highest taxed part of the UK.”

Impossible for rural properties to meet EPC C targets

Scottish Land & Estates say for rural private rented properties it could be impossible to reach EPC C targets.

The organisation points to an example of a traditional Aberdeenshire cottage, where the landlords spent more than £56,000 in energy-efficiency improvements, but despite the huge costs spent in improving the property, the cottage still does not meet EPC C targets.

Anna Gardiner, Scottish Land & Estates, said: “Rural properties are typically much older and therefore much harder to treat. Owners of traditional rural homes, who are vital providers of rental housing, face higher upgrade costs, limited access to contractors, and lower rental incomes, compared with urban rental properties.  We support the aim of the legislation, reducing carbon emissions from property, but there are specific challenges in rural and island areas.”

Ms Gardiner adds: “In our meetings with government, we have stressed that focusing solely on heat retention means that a huge number of rural properties are unlikely to ever achieve compliance.

“Amending the regulations to take into account the efficiency, and consequently carbon emissions and running cost, of a heating system would result in a more effective and practical approach to energy efficiency, while reducing heating bills for tenants.”

Landlords in Scotland are not immune to financial challenges

Industry body Propertymark also warn of the impact the energy-efficiency targets could have on rural properties, particularly with the Scottish government’s plans to introduce rent controls.

Timothy Douglas, head of policy and campaigns, at Propertymark, tells Property118:  Any proposals for Minimum Energy Efficiency Standards for the private rented sector in Scotland must be realistic and achievable and take into consideration the impact on the supply of much-needed homes to rent in rural, island and urban communities.

“Policymakers must recognise that landlords in Scotland are not immune to financial challenges from increased mortgage and building costs and will experience further financial challenges with the onset of rent control measures contained in the Housing (Scotland) Bill.”

Mr Douglas adds that grants must be available to landlords to improve energy efficiency.

He said: “Improved financing for energy efficiency improvements must be made available through grants and a more attractive and better publicised landlord loan scheme.

“It is important that the changes are gradually introduced. A compliance deadline of 2033 risks putting too much pressure on the labour force and supply chain, leading to artificially high prices for energy efficiency improvement measures.

“We will continue to engage with the Scottish government to ensure these proposals are appropriate for the private rented sector in Scotland.

Damage the private rented sector

The Scottish Association of Landlords also warn that the proposed regulations will harm the PRS and urge the SNP to invest in the sector instead of imposing more regulation.

Scottish Association of Landlords chief executive, John Blackwood, tells Property118:  “These minimum energy efficiency standards are the latest in a long line of policies in Scotland that will damage the private rented sector.

“Making it more difficult or bureaucratic for landlords to invest will only force more of them out of the sector or to reduce their portfolios, leaving fewer homes available and driving rents up.

“During a time of housing crisis, ministers and politicians should work with us to make Scotland an attractive place to invest in housing; only by doing so can we create a private rented sector that works for us all.”

Cost cap could push rents up

The Scottish government has proposed a £10,000 cost cap on the upgrades landlords must make to meet the new energy-efficiency standards.

However, Scottish Land & Estates warn the limit could push rents up and reduce the number of rental properties, especially in rural areas.

The organisation says: “The cost cap of £10,000 takes no account of regional variations in market rents and could lead to rent increases or a further reduction in the supply of rental property, which is already under real pressure.

“We would urge the Scottish government to undertake a full rural impact assessment before these regulations are finalised.

“This is essential to ensure the framework is fair, workable, and aligned with Scotland’s housing, fuel poverty, and net zero ambitions, without compromising the resilience of rural housing supply or penalising rural property owners who are already investing to improve energy efficiency.”