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Good morning. It’s me — Georgina, Inside Politics editor — in for Stephen today.
A safe, warm home is absolutely fundamental to our mood and health. That’s something I grasped during my first few months renting a damp flat earlier this year. The sheer burden of finding another flat in the most competitive market on record, where rents are rising at their fastest pace in 13 years, was enough to put us off giving our notice, for a time.
I learned that mould (painted over in an almost laughable attempt to cover up the problem) is not uncommon — most friends concurred with my experience when I told the story. But the other thing I realised was the patchy regulation. A sobering paper on Wednesday by the Joseph Rowntree Foundation reported the rapid growth of the rental sector in the past two decades. “Bringing with it greater unaffordability, insecurity, and driving inequalities in wealth.”
As I discuss in today’s newsletter, this may prove a stumbling block to the government’s home energy efficiency drive. Share your thoughts at the email address below. Stephen will return on Tuesday.
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A nation of leaky homes
Wet, wet, wet. British homes are the worst insulated in Europe, according to a Tado analysis of 80,000 European homes. It’s especially bad if you rent. The current system of energy efficiency rating (EER) goes from “A”, the most efficient, to “G”, the least. Almost two-thirds of the 4.6mn households in the private rented sector in England are rated D or below, the English Housing Survey showed this month.
Private renters are also more likely to be in the F or G bracket than owner occupiers. It’s unsurprising given the PRS has the biggest share of stock built before 1919 and is generally less well insulated than other tenures.
We’re in this pickle because, as things stand, only private landlords with F or G ratings are legally obliged to take action to get into the E bracket. If they spend £3,500 in the effort and don’t achieve E, they can apply for exemption. Even then, the maximum fine for failing that standard is £5,000, and landlords rarely have to pay the highest amount. No regulation exists to jolt homes out of the “not the worst, but real bad still” energy efficiency brackets (this could change — more on that below).
That’s why people like Dan Wilson Craw, Newcastle-based deputy director of Generation Rent (GR), are campaigning for more councils to exercise their powers on the homes considered too cold to be legal. It’s hard, and I’m doubtful the government’s £4.3mn cash injection to 57 local authorities in this effort will be enough to beef up their compliance watchdogs.
Energy efficiency is Wilson Craw’s priority, with F or G rated dwellings costing tenants £321mn extra in energy bills this year, according to GR calculations. He said:
Generation Rent exists because of the poor quality, insecurity and unaffordability of renting. A lot of what governs all these things in the market is down to legislation and how it’s enforced.
Poor insulation in rental housing is bound up with the same problems that make renting in the UK often precarious: short tenancy agreements and scant regulation (making hazards such as a bed above a kitchen a passable offering on Gumtree, the rentals website).
For example, just 28 per cent of renters would ask their landlord to make energy efficiency improvements, according to GR’s 2021 poll. What’s stopping them? “Many renters I speak to are reluctant to raise it with their landlord, because they fear being evicted. Or they worry the landlord will make improvements, but then raise the rent,” Wilson Craw told me.
The UK renters’ reform bill, published last month, will end “no fault” evictions and introduce an ombudsman to help landlords and tenants settle disputes out of court. But until that legislation is enforced, those who are unlucky enough to be in a leaky rental feel obliged to stomach soaring energy bills at a time when rents are rising at record rates, if their landlord refuses improvements. As Grace Lally of the Radical Housing Network said, “regulating insulation without security of tenure and rent is nonsense”.
Lally was referring to the government’s ambition to crack down on draughty homes. In efforts to achieve net zero targets, the government wants all homes in England and Wales to reach a minimum of EER level “C” by 2035. The rental sector has a tighter deadline: existing and new tenancies must be up to scratch by 2025 and 2028 respectively.
The problem with this is some landlord-investors can’t shell out. Research by Shawbrook Bank found only 31 per cent of landlords have funds to update their properties in line with requirements. Recent tax changes have also reduced landlord profits.
Some will start dumping properties which they cannot get up to “C” due to the cost of changes or other reasons, causing, as the FT’s James Pickford explained, knock-on effects on affordability and the housing market.
“For many houses in the north-east and north-west of England, which have low asset value and rent prices, it won’t be viable to keep the business,” Chris Norris, of the National Residential Landlords Association, told me. Fewer rentals available mean higher rents.
The government outlined plans to ban landlords after 2025 from letting properties with an EER below C in 2020. But it is yet to reply to a consultation on the proposal which closed in January 2021. Nineteen months on, there is no detail on when and how this will become law. “It’s hard for landlords to prepare,” said Norris.
Wilson Craw said: “If the government doesn’t act soon, suddenly there’s going to be a rush for tradespeople who can retrofit homes in a very small window of time.”
To allay panic, there are a few things the government could do to help landlords and tenants shoulder the rising costs of materials and installation (heat pumps start from about £12,000), said Norris. Localised funding, the return of the Landlords Energy Saving Allowance, and tax efficient ways of retrofitting, are just a few ways to shave off pennies.
Lally fears the 2050 net zero pledge is already putting us on borrowed time. Most of the homes we’ll be living in in 2050 have already been built. “We will never get back this window of opportunity to change how we use and source energy,” she said. “Tinkering around the edges of rental regulation is a joke.”
Even dimmer words came from the Climate Change Committee report. The foreword laments that we are still building new homes which will not meet minimum standards of energy efficiency. For owner-occupied homes, there’s little to support retrofitting, no mandatory minimum energy performance requirement for mortgage lenders, and no incentive for homeowners. This chart from the CCC shows the scale of the challenge, and what happened when the government “cut the green crap” in 2012:
Whether the next prime minister will continue Boris Johnson’s “clean, green energy” ambition — even at the expense of possibly irking owners of older homes by imposing energy efficiency rules — is far from assured.
An Englishman’s home is his castle — as successive Tory governments have lauded implicitly through policies such as Right to Buy, Help to Buy and cuts to stamp duty for first-time buyers.
But this ownership-first approach has squeezed social housing affordability, lumping pressure on rentals. Right to Buy contributed to a 50 per cent drop in social housing as a proportion of stock since 1980, according to the Joseph Rowntree Foundation. In Milton Keynes, my hometown, 71 per cent of ex-council housing sold through the Right to Buy scheme is now owned by private landlords.
While we need more investment in insulation in all tenures, the rental market first needs fair regulation to make green improvements workable and protect tenants if landlords want to sell up. “Change the rules of the game,” as the JRF said.
Now try this
The London Open at Whitechapel Gallery in east London is a free triennial exhibition showcasing work by artists in the capital.
One of the entries selected for the show was Will Pham’s lovely film about the An Viet Foundation, a community hub set up in the 1980s to support Vietnamese refugees arriving in Britain after the second Indochina war. In my spare time, I volunteer as a custodian of the foundation’s archive, which tells the story of the generations of Vietnamese families who passed through Hackney.
The London Open runs until September 4. Have a wonderful weekend.