Propertymark is backing a call for financial help for landlords who improve the energy efficiency of their properties.
The think tank E3G has written to the Treasury saying that one in four households in the private rental market is estimated to be in fuel poverty, and that there is a need for policies to incentivise landlords to improve energy efficiency.
The letter - signed by Coventry Building Society, Citizens Advice, and Nationwide Building Society, plus the National Residential Landlords Association - says “simple tax restructuring to allow energy performance management to be offset against rental income could help make investment more attractive for landlords”.
It adds that the Autumn Statement by the Chancellor - expected in November - would be the right time to introduce incentives.
Expressing his support for the letter’s call to action, Propertymark policy and campaigns director Timothy Douglas says: “A simplified exemptions regime and additional financial support must be made available to property owners otherwise the measures in their current form will not be achievable and that would mean further reductions in the supply of rented accommodation available.”
Dear Chancellor of the Exchequer,
Re: Incentivising energy efficiency investment in the private rented sector
We are writing as a coalition of financial institutions, consumer groups, fuel poverty organisations and landlord and letting agent associations to encourage the reintroduction of tax exemptions for energy efficiency improvements made to privately rented properties. This will make investments more attractive to landlords and property agents, while reducing energy bills for renters.
There is a compelling case for boosting energy efficiency in the private rented sector. Citizens Advice highlighted that renters face widespread problems with damp, mould and cold, with 1.6 million children exposed to these conditions.
Around two-thirds of privately rented properties in England and Wales fall below EPC C, the government’s target rating for all fuel poor homes by 2030.
There is evidence that tax incentives could help make investments more attractive, incentivising retrofit. Recent survey evidence from Propertymark, the UK’s leading professional body for property agents, shows that nearly 70% of agents think that support should extend to allow energy efficiency improvement to be offset against capital gains tax.
A simple tax restructuring to allow energy performance improvements to be deductible against rental income could help make investment more attractive for landlords. Individual landlords currently pay income tax on their rental properties at the same rate as other earned income.
Before they work out how much they will be taxed, landlords may deduct costs of managing the property, legal fees, replacement furniture, insurance, utility bills, ground rent and maintenance and upkeep – but not energy saving improvements. We encourage this allowance to be expanded to include expenditure on improvements that result in an increase in the Environmental Impact Rating of the property, or included in an agreed list of measures (i.e., loft insulation, cavity wall insulation, etc). This would represent a maximum tax revenue foregone of £1.2bn to 2028, or around £0.24bn per annum over 5 years.
This simple tax change could drive investments that bring about significant energy bill savings for renters and support a shift towards higher standards, helping meet fuel poverty targets. We would be pleased to discuss this further.
Kind regards,
E3G
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From what I read in the professional property press it seems pretty certain that the Conservatives are looking at:
1. The Tories excellent, flag-ship legislation of the Minimum Energy Efficiency Standard 2015 (MEES) will be slowed down for the domestic rental sector. EPC Grade D, as a minimum by 2028, for new lettings and continuing lettings seems to be their preferred pathway. Grade D is the average grade for a UK home.
2. The sensible MEES self-exemption register will remain in place allowing domestic landlords to continue to rent out their units if the cost of upgrade is prohibitively high. Many landlords have already self-exempted themselves from the MEES Grade E minimum standard. All makes sense.
3. The domestic EPC national measurement system will be bought in line with commercial EPCs and will show the carbon dioxide pollution measure as the primary EPC Grade. The current running cost EPC Grade will also be show. The EPC Recommendations will then NOT recommend the installation of new gas boilers - this is the reform that many Letting Today readers have been calling for.
4. For houses and flats with different heating systems domestic energy assessors will now have to use the Full SAP software which allows for many more inputs and is much more accurate (that's why legally it has to be used for all new housing EPCs). Again this brings domestic EPCs in line with commercial EPCs where, since 2008, complex commercial buildings have had to be assessed by more highly qualified professionals.
This all seems rational, appropriate and proportionate. This will help to steadily improve private rental houses and flats over the long-term to be 'fit-for-purpose' for both landlords and tenants.
Gibbons shows off his new skill of copy/paste.
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