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Government Abandons Landlord Obligations for Energy Efficiency Upgrades, Drawing Mixed Reactions

In a surprising turn of events, the British government has opted to abandon its plans to mandate landlords to enhance the energy efficiency of their rental properties. The decision, announced by Chancellor Rishi Sunak on Wednesday, marks a significant policy shift as the government pivots away from several green initiatives, including the proposed minimum Energy Performance Certificate (EPC) standards for rental homes.

Though these measures had not yet officially become law, they had long been a source of apprehension among landlords. The proposed regulations would have required landlords to upgrade their rental properties to achieve a minimum EPC rating of C by 2028. EPC ratings range from A to G, with A representing the highest energy efficiency and G the lowest.

Currently, all rental properties in England and Wales must have a minimum EPC rating of E to be eligible for renting, unless they qualify for an exemption.

The recent government reversal appears to cement the existing minimum EPC rating of E as the standard for the foreseeable future. Chancellor Sunak justified this change by suggesting that the substantial costs associated with property upgrades would likely be passed on to tenants in the form of higher rents.

While the government will provide some financial support to landlords for property upgrades, they will no longer face the threat of fines for failing to retrofit their properties.

The looming prospect of having to meet a minimum EPC rating of C had weighed heavily on landlords for some time. In fact, it was a key factor in the decisions of some landlords to divest from the rental sector. Ben Beadle, CEO of the National Residential Landlords Association, welcomed the news, emphasizing the need for clarity in government policy.

Beadle stated, “The uncertainty surrounding energy efficiency policy has been hugely damaging to the supply of rented properties. Landlords are struggling to make investment decisions without a clear idea of the Government’s direction of travel. It is welcome that landlords will not be required to invest substantial sums of money during a cost-of-living crisis when many are themselves struggling financially. However, ministers need to use the space they are creating to develop a full plan that supports the rental market to make the energy efficiency improvements we all want to see. This must include appropriate financial support and reform of the tax system which currently fails to support investment in energy efficiency measures.”

However, not everyone is pleased with this change in government policy. Dawid Baranowski, of property technology firm IMMO, believes that EPC regulations play a crucial role in ensuring sustainable and affordable living in the future.

Baranowski explained, “Minimum energy standards, while essential for achieving the Paris goals and the UK Net Zero strategy, are also a beacon of hope for consumers as they reduce cost burdens and contribute to the decarbonization of real estate. The fact the government is making a u-turn on these standards which have been in the public domain for years is disheartening, as the brunt of such a decision falls on renters, who are often not landowners and will absorb the burden of the higher energy bills, especially at a time when we are grappling with a cost-of-living crisis. More than 2.4 million privately rented homes in England will experience higher energy bills with renters facing £1.4 billion costs as a result.”

Dan Wilson Craw, deputy chief executive of Generation Rent, also expressed concerns over the government’s decision.

He added, “Leaving the impact on the climate to one side, it makes the cost of living crisis worse and damages renters’ health. One in four private renters lives in fuel poverty and, without targets for landlords to improve their properties, they face many more years of unaffordable bills. Energy efficiency is also an essential part of a home’s quality. Backtracking leaves the Government’s levelling up mission to halve the number of non-decent rented homes in shreds. Both tenants and landlords need support to upgrade private rented homes, and the Prime Minister recognized that ‘big government grants’ help make it affordable. But without higher standards, landlords have no reason to accept tenants’ requests for improvements.”