Labour pushes heat pumps on landlords but Parliament won’t install them

... ' Do as we say, not as we do ' - or Not Leading by example.
This Liebor shambles of Renters Rights [sic] is akin to the Monty Python Dead parrot sketch.

Typical stories around the installation of heat pumps are along the lines of having to spend £20K to make a saving of £200 per annum on your annual energy bill (probably comparing that to an old-fashioned boiler rather than to a modern condensing boiler) and having to sacrifice a room the size of a small bathroom or toilet in order to get all the plant for the heat pump in. It's for rich people. And some people install heat pumps only to find that the performance is poor and their energy bills go up.

My current boiler is a Worcester Bosch gas condensing boiler. It takes up the space of a small cupboard. When I last installed it the performance I got was noticeably better than my previous gas condensing boiler (which was still quite good). So the government is trying to strong-arm us from using a technology that works fantastically well to something that doesn't perform as well,. At the same time the government taxes us more per unit of energy on electricity than it does on gas (PS: just in case anybody is wondering I don't have shares in Worcester Bosch and have no commercial connection with them).

Last week a massive new gas field was discovered in Lincolnshire:

https://www.lincolnshirelive.co.uk/news/local-news/government-says-110billion-gas-field-9952799

Knowing that, would you really want to be disconnected from the gas network? And would your tenants really want that?

The problem with the energy performance of rental properties is the tax system.

There is a good argument for changing the way we heat and power properties and that's energy security. However, it would make more sense to upgrade with a hydrogen-ready gas boiler, possibly with the use of photovoltaics, and pursue policies that favour the wider adoption of hydrogen storage to prolong the life of fossil-fuel stocks.

If the government wanted to do that the smartest way would be to make it simple for any small landlord to incorporate with the benefit of roll-over relief and ensure that the capital allowances are available for incorporated BTL businesses to invest more for the long-term in renewables.

We are told that heat pumps generate up to 3 times more energy per unit of electricity than they consume. A Kwh of electricity is about 25 pence. So if you want 3kw of heating it will cost you about 25 pence per hr with a heat pump. Do the same with gas at about 6p Kwh and it would cost 18p which is about 38% cheaper. So unless electricity prices drop or gas prices rise a heat pump is not a cheaper option. That’s why energy cost based EPC’s don’t improve if a heat pump is fitted.

Reply to the comment left by northern landlord at 18/02/2025 - 13:41
That's right. To make matters worse, from memory the government charges the consumer about 5-6 times more tax per unit of electricity than gas.

And if you really wanted to make heat pumps work, whether for owner-occupiers or tenants, you'd probably need to add a large array of photovoltaics to offset those increased electricity costs. If you have to raise finance for the tens of thousands of pounds to make it all work then unless you already have your properties in a limited company the tax system penalises you for raising extra finance.

The government recently came out with figures saying that to move from band D to band C would cost £5-6K on average. This is nonsense that is based on the cost of cavity wall insulation that is unsuitable for many properties. As many tenants have no accommodation, or are living in cramped accommodation prospective tenants are more likely to benefit having a modern condensing gas boiler and having you spend £5-6K on an extra bathroom or toilet.

Reply to the comment left by Beaver at 18/02/2025 - 14:29
My suspicion is that this and the previous government would like to retain at least some of the gas network to support a transition using a hydrogen blend with natural gas but cost per Kg are still too high as commercial production has lagged early forecasts.

After all, Hinkley C is not expected to come online for another 4 years and this winter has shown that windless days still leave us reliant on gas for electricity generation. Even battery storage sits unused, as pricing arrangements deem this supply too expensive and are not due to be revised for at least a year.

Finally, let's not forget that most days we are importing at least 10% of our electricity.

https://grid.iamkate.com/

Reply to the comment left by Rod at 19/02/2025 - 12:01
I think that's right. You probably can make air-source heat pumps work in some homes if they've got fantastic insulation, can run the pumps for 24 hours and make use of cheaper tariffs at night and if the occupants have the intelligence to use them sensibly (this rules out some tenants). But it's not going to work in most band D properties and the cost of moving most band D properties to band C isn't £5-6K. That's just a lie.

One of the problems we face as owner-occupiers and landlords is the disinformation (some of which comes out of government), the biased information, and the lack of reliable information.

There is a lot of disinformation out there but some of it offers you a clue to the real problems. Here's a bit for example:

https://cornwall-insight.com/press-and-media/press-release/hydrogen-uncertainty-could-delay-uptake-of-low-carbon-heating/

This post entitled "...hydrogen uncertainty could delay uptake of low carbon heating..." states "...Some in the energy industry have voiced concerns about the viability of hydrogen as a replacement for gas in home heating, with cost and safety often cited as key barriers." That phrase "...some in the energy industry..." should prompt you to think, "...so where's the bias". And the phrase "..delay uptake of low carbon heating.." should also be ringing alarm bells.

Historically there has been an issue with storing hydrogen for use in cars because hydrogen is a very small molecule, smaller than methane (CH4) and it will actually leak from some containers that will store other gases. This means that the weight of hydrogen storage has been a limiting factor in use in vehicles historically.

But the issues with safety are over-stated. We are used for example to have large tanks of hydrocarbon fuel oil or large tanks of liquid propane gas sitting outside both industrial buildings and also residential buildings. Some of the domestic hydrocarbon storage equipment actually uses recovered cooking oil. Using this to heat your house is a reasonably 'green' alternative to energy from the grid, although of course there is likely to have been some diesel used to grow the rapeseed oil before anybody cooked chips in it. But it's recycling a largely renewable source and it makes a contribution.

So when you look at the objections to hydrogen objectively you realise that some of the misinformation can't be right. Some trains on the european continent run on hydrogen. Some commercial vans in the UK, including in heavily populated areas like London, run on hydrogen. And there is a growing number of domestic hydrogen storage installations around the european and scandinavian regions, even in areas that get probably even less sunlight than we do.

So the calls for moving from band C to band D (that have nothing at all to do with reducing climate emissions, even from UK domestic housing stock) are really because somebody somewhere set a meaningless target and somebody allocated a net- zero-minister-that-never-was to achieving the meaningless target.

Unfortunately the consequences of meaningless targets like this are inflicted upon tenants. The problem with both UK rental housing stock, and also UK owner-occupied housing stock is the tax system. If the tax system changed then a vary large number of us could look at reducing our dependence upon non-renewables. It won't necessarily affect climate change, but it would increase energy security both by reducing our dependence upon non-renewables, decreasing our dependence upon imported energy, and also by diversifying our energy system.

With respect to buy-to-let properties if the government allowed any landlord of any size to claim roll-over relief and incorporate, and also added relevant capital allowances then the market could fix much of the problem.

For owner occupiers, if the government permitted some of the improvements to be offset against income tax, or as a credit against CGT for pensioners, then a lot could also be done for owner-occupied stock.

The government must realise this by now and if they are doing something different it will be because they are committed to ideologies that are out-dated, damaging for society generally, damaging for our economy and possibly damaging to our environment. (PS: any tenants, if you are reading this you will be made to suffer for this dishonesty and incompetence).

The problem with our PRS housing stock is the tax system.

Reply to the comment left by Beaver at 19/02/2025 - 13:15
You are right about the disincentives, and lack of well-structured incentives in the tax system.

Given that it looks like Rachel from Accounts might freeze allowances for the life of this parliament, you wouldn't need special treatment for pensioners, as it seems that forcing them to file tax returns will do wonders for the UK's productivity.

Look, I get the unfairness of second (trophy) homes and the impact of furnished holiday lets, but FHLs were a direct consequence of S24 and the growth of compliance red tape, including mandatory RROs and restrictions on evictions.

Raising the SDLT surcharge to 5% when the Government has confirmed that FHL tax treatment will end, so all direct rental income now under S24, no capital allowances, BADR or qualifying pension income.

Obviously, the work experience Treasury team don't understand the power of incentives, such as allowing all EPC work to qualify as expenses (think 100% capital allowance expensing) or offsetting the 5% SDLT against rental profits.

As you say, some form of roll-over relief would encourage more landlords to incorporate, which would support more tax and succession planning options.

Given the government's need to resolve the housing, and local authority housing budget crisis why have they put a binary bet on the big house builders who have not got a great reputation (help to buy, NHBC defects, cladding and other building safety, building on flood zones, leaseholds, unadopted spaces). I fear that time will not look favourably on PBSA or BTR properties.

It is small and medium size landlords who risked their own money to double the PRS since the millennium.
Give us the tools and stop putting barriers in our way.
Voters will reward results, not dogma. We need planners and skilled workers, not the RRB and unrealistic EPC targets.

Finally, those wondering what the UK is currently doing on hydrogen might find this informative

https://ukhea.co.uk/uk-hydrogen-project-map/

Hydrogen is far less of a safety hazard than natural gas. Its low density and small molecule size mean that any leak wizzes straight up through the ceilings ,floors and roof in an instant and is gone it doesn’t hang around like natural gas to form an explosive mixture..
Electrical equipment certified for use with natural gas is not automatically suitable for hydrogen so a lot of equipment would need changing out. This would include most smart meters, so using pure Hydrogen or a gas mixture containing Hydrogen would mean many meters and other equipment would need upgrading. A bit embarrassing and maybe a reason the Government does not seem keen on a hydrogen based economy as although it would be ideal the cost would be enormous.

Reply to the comment left by northern landlord at 19/02/2025 - 14:49
One of the things that has caused some of the misinformation out there about hydrogen is that some of the hydrogen is 'blue' hydrogen (produced from CH4) and some of the hydrogen is genuinely 'green' hydrogen produced by connecting either photovoltaics or wind generators to electrodes linked usually to the mains water supply. This is already being made to work in parts of scandinavia and parts of europe.

It's certainly no more of a safety hazard than natural gas and the problem is simply that our energy suppliers and our government aren't used to it and are not very good at innovation. That and the fact that they are committed to the strategies and misinformation that keep them in their jobs.

Whether it's hydrogen generated from photovoltaics or wind, photovoltaics or wind-generators, recycled cooking oil, or a better wood-burner with a triple burner and a back-boiler, the real problem stopping you making the capital investment is the tax system.

The best argument for upgrading our energy system is energy security. It isn't just a question of it being less easily knocked out by 'bad-actors' like Vladimir Putin. Diversifying our energy system means that we are less vulnerable to unions and the public sector holding us to ransom for four-day working weeks, flexitime, £70K per annum and pensions that most of us (and ultimately none of us) can afford.

Whatever the chosen technology the reason that it's not practical is because most landlords can't incorporate without a massive CGT charge as they are not currently eligible for roll-over relief, the capital allowances aren't there, and at present the tax system penalises non-incorporated landlords for raising extra finance. The only solution just to remaining compliant (as opposed to investing in a more sustainable future) is to inflict the pain of incompetent governance on tenants.

I think it's unlikely that this government will make the required changes because they are OUTRAGEOUSLY incompetent and ideologically committed to something else.

Reply to the comment left by Rod at 19/02/2025 - 14:43
Thank you for the hydrogen map.

Just in case anyone is wondering I don't have any commercial connection to the UK hydrogen project; my interest in this area is because I've seen coverage of domestic hydrogen installations on TV, I can see the technology available to purchase on line and the science is relatively easy to understand (because it's simple).

And my interest is indirect: As far as I am concerned, the real problem with implementation of a more diverse and resilient domestic energy supply in the United Kingdom is the tax system.