Landlords call for more support to boost energy efficiency

The tax system is in urgent need of reform to support energy improvements to rented housing.

That is the call from the National Residential Landlords Association (NRLA) as the Chancellor prepares his Budget for the 3rd March.

It comes as MPs on the Environmental Audit Committee last week concluded that the delivery of the Government’s flagship Green Homes Grant scheme has been “poor”. It noted that the eligibility criteria for the scheme: “prevented many from being able to access vouchers for the measures they required.”

Given that over 32 per cent of properties in the private rented sector were built before 1919, it faces a huge challenge in making homes energy efficient when compared with any other housing sector.

The Government has committed to upgrade as many private rented sector homes as possible to Energy Performance Certificate (EPC) Band C or better by 2030. Currently, 62 per cent have an EPC rating of D or lower.

The NRLA is calling on the Chancellor to help achieve this by ensuring that the tax system actively supports landlords who want to make energy improvements. Ministers have proposed to increase the amount up to which landlords have to pay to make a property more energy efficient from £3,500 to £10,000.  According to Government data, the average gross rental income for landlords is £15,000 per year (before tax and other deductions), and the impact of this change is likely to decimate the income of some landlords.  

The NRLA is proposing that energy efficiency measures carried out by a landlord should be offset against tax at purchase, as repair and maintenance, rather than as an improvement at sale against Capital Gains Tax. This would address anomalies – for example, whilst replacing a broken boiler is tax deductible, replacing an energy inefficient model for a more efficient boiler or heating system is not.

In 2019 the then Chief Executive of the Energy Saving Trust, Philip Sellwood, argued that there was “no reason” why the tax system could not be used to “incentivise landlords through tax relief” to support improvements of this kind. 

Ben Beadle, Chief Executive of the National Residential Landlords Association, said:

“The rental market stands ready to play its part in securing a green recovery. However, to achieve this we need a tax system that properly supports and encourages the work needed to ensure rented homes as are energy efficient as possible on a long-term basis. The Green Homes Grant scheme proves that short term measures do not work.  

“The Chancellor needs to use tax more positively to encourage investment in energy improvements. This would play a crucial role in cutting bills for renters, reducing carbon emissions and improving the nation’s housing stock.”

More information 

• The NRLA launched its Green Homes Grant campaign in September 2020 as part of the organisation’s wider energy efficiency work.  You can find more information on the campaign here 

• The English Housing Survey for 2019/20 reports that 32.4% of private rented properties were built before 1919. See annex table 2.1 here 

• The Government’s recently closed consultation on the energy performance of private rented properties can be accessed here

• The English Housing Survey for 2019/20 reports that 61.4% of private rented properties have an Energy Performance Certificate rating of D or lower. See annex table 2.8 here  

• The Government’s most recent private landlord survey for England can be accessed here. 

• The Environmental Audit Select Committee report can be accessed here 

• In 2019 Philip Sellwood the then Chief Executive of the Energy Saving Trust gave evidence to the Business, Energy and Industrial Strategy Select Committee. His comments on tax can be read here