Energy Bill [HL]

Lord Best Excerpts

Wednesday 22nd December 2010 Lords Chamber

[Lord Best]

My Lords, my comments address Chapter 2 of the Bill concerning the private rented sector. I declare my interest as chair of the Private Rented Sector Policy Forum, which brings together representatives of tenants and landlord organisations. I have declared my other interests in the register.

I think that the Green Deal is a really helpful and innovative response to the urgent need for investment in energy-saving measures in the PRS—the private rented sector—and I congratulate the Government on bringing forward these proposals. For years, many of us with an interest in the PRS have worried about fuel poverty among poorer tenants. The sector has the worst record for unfit houses, yet landlords have had little incentive to upgrade the energy efficiency of their properties, as they do not pay the heating bills. Quite a few small-time landlords—and there are more than 1 million private landlords in the UK—have not had the resources to do the necessary work. Some are relatively poor themselves and, because the cost of improvements can seldom be recovered in the rent, they are unlikely to act. Some are heavily mortgaged as buy-to-let investors and cannot take on further debt.

Even in extreme circumstances where the property is so badly insulated and heated that it requires a small fortune to keep it warm, and indeed where it constitutes a health hazard, local authorities have been reluctant to get involved for fear that the landlord will simply withdraw a low-rent property from the rented market. That is a bigger risk than ever at a time when cuts to housing benefit mean that landlords are going to be increasingly reluctant to let to those on lower incomes.

The Green Deal addresses this dilemma. The landlord does not have to pay and, although the cost falls on the tenant, because fuels bill are reduced and costs are spread over many years, the tenant should get a much warmer and more comfortable home for little or no extra monthly expenditure. The landlord benefits from an improved property, which is less likely to deteriorate through dampness and have problems with mould growth, and indeed from more contented tenants, and the planet benefits from lower CO₂ emissions. So, is the job done? Will the Energy Bill achieve the breakthrough needed here and ensure that thousands of sub-standard properties are uprated in terms of energy efficiency, or are there still some improvements to be made by your Lordships to these measures?

The Association for the Conservation of Energy and Friends of the Earth, with some 30 organisations in support, believe that the Bill should go a step further and prohibit the letting of properties that have failed to meet a minimum energy efficiency standard by 2016. That approach is supported by the London Mayor, Boris Johnson, and by the Government’s fuel poverty advisory group. The latter favours making it illegal to let a property with an energy performance certificate that rates it as F or G—the bottom of the scale. The British Property Federation, however, speaking for landlords—and a number of landlords spoke at a meeting of the PRS policy forum last week—disagrees. It thinks that compulsion would be counterproductive and states, among other things, that using the energy performance certificates would be a flawed approach. It accepts the Government's own fallback position, if a review one year on shows that landlords are not responding to the opportunities presented by the Green Deal—namely, to empower tenants to require reasonable energy improvements to their homes, with local authorities given new powers to act.

I hope that we can explore the arguments here as Committee progresses. My initial comments cover both carrots and sticks, and are as follows. First, the Green Deal arrangements, as presently proposed, will not work where the cost of the upgrade to the property is so much that the burden of repayment that falls on the tenant, even if spread over 25 years, leads to a much bigger monthly payment on the fuel bill. Indeed, in such circumstances, fuel poverty could be worse than before. For older houses—and 40 per cent of the private rented sector stock was built before 1919—costs could indeed be high. Cavity wall insulation is not possible for those properties, and solid wall insulation can cost more than £10,000 per house. It is hard to fit double glazing economically in listed buildings or properties in conservation areas, where extra planning restrictions apply.

I suggest, therefore, that in those high-cost cases, the benefits of greater energy efficiency in reducing CO₂ emissions go beyond the advantages to tenants or, indeed, landlords, and justify for the greater good the public subsidy which, if those properties are ever to be uprated, will be needed. A gap will have to be bridged between the expense it is realistic and fair to expect the tenant to cover and the actual cost of the energy-saving improvements.

Secondly, it seems likely that a lot of landlords will not be minded to do very much about the Green Deal unless pushed quite hard. There will be a role here for managing agents, who look after some 60 per cent of all privately rented properties, and who should be targeted just as much as landlords themselves by the energy companies, the Green Deal providers. Should a target be set for those providers to bring a fixed proportion of privately rented homes into the fold, rather than just concentrating on the easier option of persuading homeowners to take up the deal?

It seems unrealistic to expect tenants in poor quality property to be the front line in making negligent landlords, the ones without any excuse for inaction, take up the new opportunities. There is a high turnover in that sector, with lots of young, mobile tenants moving on within a year or so. They are not going to get into the hassles of making their landlord perform.

The Government need to factor in here the impact, especially from 2012 onwards, of those housing benefit cuts. Any tenant in receipt of local housing allowance, or in any danger of their income falling to the point where they may need LHA, cannot afford to fall out with their landlord in any way. They will already be having to request a rent reduction at a time when rents are rising in the face of acute shortages, and it seems improbable that they will risk losing their home by taking action against their landlord to install energy efficiency upgrades to the property. Yet it is at this end of the market that the lowest standards are likely to prevail.

In putting the onus on tenants to propel the Green Deal, if that is not likely to achieve much, it would certainly be worth enhancing the role of local authorities, as the Bill proposes, to step in. However, I am anxious that councils will need resources to play their part. With so many other demands on their financial and human resources, they may be minded to put this low on their list of priorities, unless there are specific incentives to drive this forward. It would certainly seem worth while for government to give itself the powers, used only in prescribed circumstances and with proper exemptions, to ban landlords letting the very worst properties. The threat of action may well be a sufficient stick to prevent the need for intervention. What are the dangers of this driving out some landlords? Clause 40 stops the Secretary of State pursuing changes that could decrease the number of properties available for rent, but I am not sure that it would be such a bad thing if some poor quality rented properties were sold off into owner-occupation where more energetic new owners can take up the opportunities and bring these properties up to standard.

I greatly welcome the Energy Bill’s proposals for improving the energy efficiency of privately rented properties, thereby easing the horrors of fuel poverty, excess winter deaths and the miseries of living in cold, damp accommodation. During the Committee stage of the Bill, I hope we may be able to explore some of the changes to the Bill and, as always in your Lordships' House, send it on its way with some helpful improvements.