EPCs, COP28, and beyond: ihowz’s proposes energy plan for landlords

EPCs, COP28, and beyond: ihowz’s proposes energy plan for landlords

0:05 AM, 18th December 2023, About 6 months ago 6

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One organisation is warning landlords are being left in the dark when it comes to Net Zero.

Landlord organisation ihowz argues there is no clear roadmap for landlords when it comes to energy efficiency and is calling on the government to issue guidance.

ihowz says Cop28 has left “more questions than answers” when it comes to transitioning to Net Zero.

More questions than answers

The climate summit committed to a plan to phase out fossil fuels. However, ihowz argues that there’s no plan for how this will happen.

The organisation said: “COP28 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?”

Potential exodus of landlords

However, the Prime Minister announced plans to scrap EPC requirements for landlords in September this year as well as moving back the ban on fossil-fuelled boilers to 2035. The legislation would have required landlords to ensure their rental properties had a minimum EPC rating of C.

The mooted deadline was 2025 for new tenancies, and by 2028 for all tenancies.

ihowz says the shelving of the legislation is down to a variety of factors.

The organisation explains: “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.”

Landlords face several challenges within the EPC framework

ihowz says it’s interesting to note that the day after COP28 finished the government released a consultation on a new home energy model.

The proposed Home Energy Model, intends 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.

ihowz says the current EPC model is not fit for purpose and creates several problems for landlords.

The organisation said: “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.”

The organisation adds: “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.”

ihowz energy solutions

The organisation has come up with its own energy solutions and guidance for landlords. ihowz says these proposals aim to revolutionize the landscape, making net zero homes an achievable and rewarding reality.

Some of the proposals include:

  • 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.)
  • 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.
  • Electricity Cost Adjustment: Implement measures to rebase electricity costs, steering away from gas as renewable generation lowers production expenses.

For a full list, click the ihowz report


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Comments

Easy rider

9:46 AM, 18th December 2023, About 6 months ago

It is wrong that a 2 up, 2 down using a modest amount of energy is forced to ‘upgrade’ its EPC ahead of a mansion that uses far more energy.

The number of kWh that a property can consume should be based on its number of occupants (with allowances for health, age etc.). Go beyond this and the price per kWh should increase sharply.

Chris Rattew

11:42 AM, 18th December 2023, About 6 months ago

I have made my own proposals. These complement those given here and could be used alongside them. I have assumed measures that will not worsen the public balance sheet.

My solutions for cutting domestic carbon emissions

This is based partly on observations from our properties.

The current EPCs should be scrapped. Our largest property is our most energy efficient, based on the bills, and has the worst EPCs. A better measure may be impractical as a regular check on all properties, but a good system would have applications. Energy use per resident or square metre could be a guide.

The scrapped government EPC proposals were unworkable during an accommodation shortage. Empty D and E rated properties would still need heating and maintenance, and the rents on the others would soar to cover the costs. Some landlords and lenders could fail. Most properties could be so improved within a decade.

Greater priority should be given to the generation, transmission and storage of electrical energy, making homes and other activities greener; homes are a small part of the total.

Improving energy efficiency without longer-term adverse consequences needs a pool of trained and experienced labour, which takes a few years to develop. Increases in the work programme need to be matched to the labour supply.

Scrap grants for heat pumps. While we are still burning gas to generate electricity, they could easily increase carbon emissions. Only owners with more money can finance the work needed to make them work effectively, and they may do it anyway. Insulation of many homes would give more immediate and greater emission reductions for the same cost as heat-pump grants.

They say there are subsidies for fossil fuels. Scrap them.

Increase VAT on energy to 20%. Our let properties are on business tariffs; paperwork is needed to set the VAT rate to 5%. As student and benefits support would need to increase until the change was reflected in the CPI, the loss in net rental income (our tenancies are bills inclusive) and the net gain in government income may be small.

Give government loans to property owners for improvement and maintenance work that includes some energy improvements. The asset value of loans can balance increased government borrowing. Generally, energy improvements are carried out as part of a larger project, with perhaps only 10% or so for obviously energy-related products.

I suggest that loans could have an interest rate of 1 or 2% above base. As emission reduction is a common good, we want to make them available to everybody, so minimum repayments could be limited to be equal to the income tax that people are paying (provided all their income is taxed in the UK); this would help landlords who lose money in some years, and others who have employment issues. If a property is sold, the loan can be repaid, or sold with the property. If somebody dies or moves outside the UK tax system, the loan would be repaid from the estate, or by the home-owner.

I have previously suggested that all non-incorporated businesses should be taxed only on cash withdrawals from the business. That would support this work and enable cash to be left in the business so that there is sufficient for future work. Effectively expenditure and retained capital are then treated for tax purpose as non-capital. The tax foregone, and sometimes more, would be recovered in most cases as capital gains tax at a later date.

Dylan Morris

19:45 PM, 18th December 2023, About 6 months ago

“My solutions for cutting domestic carbon emissions” …… so what exactly are these carbon emissions ?

Michael Booth

10:19 AM, 19th December 2023, About 6 months ago

I am already in the process of doing my bit to offset climate change ,guess what lm selling up and getting out of prs it's doomed .

Rennie

21:00 PM, 29th December 2023, About 6 months ago

Reply to the comment left by Dylan Morris at 18/12/2023 - 19:45
Perzackly! When someone is able to provide the proof to me that climate change is a threat to anybody or anything I shall then consider what I would be willing to do about it.

Old Mrs Landlord

7:02 AM, 30th December 2023, About 6 months ago

Reply to the comment left by Chris Rattew at 18/12/2023 - 11:42I agree with many of your points, especially the ridiculous push for replacing good, efficient gas boilers with heat pumps when most of the electricity is generated by burning gas, but I sedulously transfer any monthly rent amounts not immediately needed in the business account to an interest-bearing savings account and can't see the sense in letting it build up in the business account where it earns nothing, as you suggest. Technically these are cash withdrawals from the business, but, when sufficient, they are used together with savings from other income to pay down any mortgages on let properties.

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