Landlords could be forced to refurbish energy inefficient homes

Graham_Devon

On reading the title, and the opening sentences, you may think that it will actually be landlords who are required to pay to make their houses more efficient.

Landlords will be forced to refurbish hundreds of thousands of the UK's most draughty and energy-inefficient homes or find themselves blocked from renting them out, under proposals unveiled on Tuesday.

The government has bowed to pressure from campaigners and brought forward an amendment to its energy bill, discussed by MPs yesterday, that would stop landlords from renting out homes that fell into the worst two bands of energy efficiency – F and G. The clause was missing from the original bill.

As a result, the estimated 680,000 rented homes falling into this category – about one-fifth of the total number of private rented residences – must be refurbished or taken off the market by 2018.
In addition, from 2016, private sector landlords will not be allowed to refuse "any reasonable request" to make energy efficiency improvements to their properties.

Can see the thinking behind it. Think it's a rather good thing personally.

However, on further reading, it appears landlords won't be paying for it at all....if I have this right...

Landlords will be able to finance such improvements through loans taken out under the government's "green deal" scheme, under which the cost of the loans will be paid for in installments on the energy bills at the property. The costs should be outweighed by the savings as less energy is used. "This means tenants will get a warmer home and cheaper bills, and the landlord gets the work done," said a spokeswoman for the Department of Energy and Climate Change.

So, it will be the tenant paying for it, through increases in their energy bills.

So, tenant gets no choice in the matter, and they get the privilege of paying the loan back on behalf of the landlord, whose property has been upgraded. But the spin is, that the tenant wins due to paying less in energy bills...well that depends on the energy they use!!

Surely I can't have this right?!

http://www.guardian.co.uk/environment/2011/jun/15/energy-bill-landlords-efficient

Kohoutek

No, I think you have it right. Here it's explained a little clearer:

http://www.simplybusiness.co.uk/knowledge/articles/2011/06/2011-06-10-green-deal-a-good-deal-for-landlords/

But it is the home improvement element that has grabbed the headlines. Under the Green Deal, loans will be available to landlords who want to improve the energy efficiency of their properties – with these loans being paid off alongside utility bills.

There are a few things to note here. First of all, landlords should theoretically not incur any costs as a result of improvements made under the Green Deal. This is because the loan repayments will be bundled into the utility bills – not paid separately. The repayments will therefore be made by the future tenants. Importantly, though, improvements will only qualify for Green Deal loans if it can be shown that the expected savings on energy bills will be at least equal to the cost of the improvements. So, at worst the tenant should see no change to their utility bills as a result of the improvements – and at best they should see their bills cut.

Loans will be available up to £10,000, and they will be repaid over a maximum of 25 years. Crucially, the loans will be linked to the utility meters, not to an individual – meaning that they will simply be ‘passed on’ if you sell the property.

Landlords will have to get the “express consent” of whoever it is that is currently paying the utility bills before improvements can take place. The landlord will also have a responsibility to explain the presence of Green Deal improvements to any future tenants.

Graham_Devon

Pretty nice deal for the landlords then. Who wouldn't take this up?

Increase in the properties value, easier to sell the property now that it's more energy efficient and the work has already been done for the next buyer. Tenants / future buyer pays more for the house due to its increased efficiency, and also get to pay the bill.

Not sure if I was a tenant I would be too happy about it though, I have to say. I can choose to put another jumper on, or to heat only one room and save myself money. I can't choose not to pay that loan back.

With no interest added, and the maximum 10k loan used, over 25 years, thats the tenant paying £33 a month for the work. Would have to save a large amount of energy to work out for the tenant. I work it out as needing to save 33% of the average household bill to break even. Would have to be pretty good energy efficiency. The work my mum and dad were looking at having done (insulation in walls and more in roof) was said to save up to 12% energy over a year.

Kohoutek

With no interest added, and the maximum 10k loan used, over 25 years, thats the tenant paying £33 a month for the work.

The interest rates on Green Deal loans will be about 8-9% I think I read somewhere - it's unsecured after all.

Graham_Devon

Well it all sounds so insane, it has to be true.

dtsazza

My understanding of this is that the loan repayments come out of the difference in the bills. I.e. your bill used to be £400/quarter, but is now naturally £320/quarter due to better efficiency => energy company charge you £400 anyway with the £80 going to pay off the loan. So with regards to the jumper comment, you still have that choice, as heating the house will still cost the same amount with the lower energy cost + loan repayment, as it would have with the old higher cost alone.

I don't know if this is guaranteed though, like student loan repayment thresholds, or whether this is just the spin to make a fixed monthly payment seem affordable. I suspect it's the latter, given that the energy company can't tell whether your bill has dropped due to efficiency or because you're just putting up with a cooler house.

Graham_Devon

dtsazza wrote: »

My understanding of this is that the loan repayments come out of the difference in the bills. I.e. your bill used to be £400/quarter, but is now naturally £320/quarter due to better efficiency => energy company charge you £400 anyway with the £80 going to pay off the loan. So with regards to the jumper comment, you still have that choice, as heating the house will still cost the same amount with the lower energy cost + loan repayment, as it would have with the old higher cost alone.

I don't know if this is guaranteed though, like student loan repayment thresholds, or whether this is just the spin to make a fixed monthly payment seem affordable. I suspect it's the latter, given that the energy company can't tell whether your bill has dropped due to efficiency or because you're just putting up with a cooler house.

As its a fixed term loan, I'm not sure how the above would apply?

dtsazza

You're probably right - I think I got that from a 60-second interview on the radio, or summat.

It does raise an interesting aspect to selling the house though, with the loan tied to the property. That said, if the renovation was worthwhile then the house's value should rise as much as (if not more than) the loan liability anyway, so the two would cancel out. I suppose it's no different to that thing where the church can theoretically demand money, in that you book it as a negative EV against the house.

OTOH, what with market forces being what they are, this is a complete no-brainer if it's likely to raise the value of the house by £10k or more - and always a no-brainer for landlords. Thus we'd see almost everyone doing it initially, until we reach a point whereby the new higher efficiency is no longer seen as an extra one pays for, but the new norm. I suppose that's actually a good sign for the potential success of the plan; after all I'm sure the point is to raise the norm of efficiency, rather than make landlords better off.

michaels

Replacing night store heaters with gas ch or air source heat pumps would definitely pay for itself.

diable

There is a market for LL's that don't put anything through the books and are off the "scale" more scaremongering and the peddling off fear to keep the people talking about real issues that are going on.

PasturesNew

I hate night storage heaters.... they're in so many cr4ppy flats. If you're out all day working they're of no use - and they're scarey looking and ugly. I had one in my last place, NO idea how to use it - so I never did. I used a fan heater instead, I understand those.

Once the heating's improved though, which the tenant will pay for, the LL will put the rent up as the heating's a better system. So the tenant will pay twice and the LL will pocket.

I'm soooo buying a house as soon as .....