Expensive rental eco-heat scheme needs rethink - top agent

A consultation to introduce boilers into homes and the private rented sector needs ‘more carrot than stick’ according to a prominent lettings agency.

DJ Alexander Ltd, the largest lettings operator in Scotland, says the current Scottish Government consultation – entitled the Heating in Buildings Bill – states that penalties may be used to incentivise landlords and homeowners to install green heating systems.

The agency says that while it is welcome that this consultation has delayed the timescale for achieving these changes to 2028 for landlords and 2033 for homeowners there remains the threat of penalties and charges if work is not progressed within fixed dates.

Landlords must fit new heating systems over the next five years and the Scottish Government has said: “Private landlords would be subject to civil penalties if they don’t meet the minimum energy efficiency standard after 2028.”

David Alexander, the chief executive officer of DJ Alexander Scotland, comments: “A relatively short deadline of five years for the PRS could reduce the number of landlords wanting to stay in the sector. Equally, ensuring there is an element of threat in the consultation is unlikely to foster good relations with the sector. Larger investors will remain, but individuals may find this a step too far and we may see an erosion in the number of properties available to rent. The inevitable result will be higher rents for tenants.”

The consultation is clear that the majority of homeowners and landlords will have to pay for these new heating systems as the Scottish Government has allocated just £1.8 billion for this work but predicted an anticipated cost of £32 billion to install appropriate systems in all homes. This equates to at least £10,000 to £12,000 per household with suggestions that owners pay for this through loans, extending their mortgages, or by releasing equity from their homes.

The consultation goes on to “require those purchasing a home or business premises to end their use of polluting heating systems [this is the term the report uses for oil and gas systems] within a fixed period following completion of the sale. The suggested time period could be as little as two years up to five years and has still to be determined.”

The consultation concedes that if the property fails to meet the new heat in buildings standard buyers “may wish to take this into account in any offer they go on to make.”

This means that anyone buying a house will be told that they must install a heat pump or similar system potentially within two years and bear all the costs associated with this. This will undoubtedly impact on the value of the property as the current estimates place the cost of these systems at between £10-12,000 but can be substantially more in specific circumstances and most people will not qualify for any government support.

The consultation goes further and states that “whether banks and buildings societies can – or already do – make complying with laws relating to your property a condition of mortgage and/or home and buildings insurance.”

David Alexander says: “Owners may be sympathetic to the idea of installing greener heating systems but there are likely to be a number of factors which put them off. Finance will be top of the list but the appropriateness of these systems for their homes will also be a major issue. The consultation states that “certain types of properties may have limited options for clean heating systems in the near term. This includes, for example, flats, homes that aren’t suitable for certain energy efficiency upgrades, or properties in areas that don’t have sufficient electrical grid capacity.

“The consultation concedes that many homes may be unsuitable for these heating systems including flats. Given that tenements comprise around 40 per cent of total housing stock in Scotland it would surely make more sense to have a consultation which reflected the true makeup of property in Scotland with appropriate options.”

Despite an extension of the deadline there was also no mention of how these heat pumps would be installed given the shortage of qualified installers in the country. 

The consultation itself states that only 5,000 people per year are currently installing heat pumps so even extending the deadline to 2033 for domestic conversions will require a major increase in the number of people adopting the new systems. The consultation paper concedes this point and states: “at the current pace it would take several hundred years to reach net zero.”

Alexander concludes: “This consultation needs to heed the words and advice of those in the sector who are concerned about the viability and achievability of these proposals and understand and reflect the potential issues a major project like this produces. The appropriateness of the offerings is too narrow for the diverse range and geography of housing in Scotland. The costs are not transparent in terms of how much each household will pay. 

“Affordability is assumed to be built in, but it is clear that homeowners will receive lower offers for their properties (acknowledged in the consultation), and that asking buyers to add in an extra £100 a month (in one example contained in the paper) may seem reasonable to some but could be the difference in an individual being able to afford a home. There is also nothing which addresses the key issue of how likely these targets are to be delivered. Where is the funding and support to increase the trained workforce to do the job and grow the businesses to deliver such large levels of installation over a short period.”

“Finally, there is far too much punishment involved in the presentation. For a proposal that is “designed to be affordable, fair and feasible” it is unlikely to achieve any of these aims for many homeowners.”