Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2018

Lord Grantchester Excerpts

Tuesday 26th February 2019 Grand Committee

[Lord Fox]

As I was saying, I romped through some questions around private finance providers and details of registration control and the management of that process. I welcome the removal of the “no cost to landlords” clause and the insertion of the £3,500 cap, but there are some issues with that. I note that VAT is included within it, and so obviously it is 20% less than you think. It includes also any other funding that the landlord is able to pull in, including local authority or Green Deal funding. Already, it starts to look like less, as it will not always be the landlord putting the £3,500 in.

I would not call them loopholes, but we then have some other ways for the landlord to invest less. One is the recognition of previous investment, which clearly is often possible. How do the Government expect to avoid that in many cases? The second point I have concerns about is the high-cost exemption. It is not hard to get estimates for jobs. Frankly, if you ask a builder to give you high estimates for jobs, they are usually better at that than they are at low estimates. I suggest that that is a gaping loophole for unscrupulous landlords, sadly many of whom operate in this sector. I would welcome the Minister’s view on that.

Another potential issue was brought up in the debate of 2016 to which I referred earlier. The Secretary of State, Andrea Leadsom, said that,

“landlords will be required to install only measures that cost the same as or less than their expected energy savings over a seven-year period, and they will be eligible for an exemption if the improvements do not meet that payback test”.—[Official Report, Commons, Fourth Delegated Legislation Committee, 8/6/16; col. 4.]

There is no mention of that payback test in the accompanying material to this SI. Could the Minister please explain that status?

My final point is this. The Minister mentioned that those obtaining an exemption will be put on a register. Will he undertake that this will be a public register so that those landlords would be fully knowable to the wider community? I await the answers to those questions.

[Lord Grantchester (Lab)]

My Lords, I thank the Minister once again for his exemplary introduction to the regulations before the Committee today. I note that, at last, we have come out of the jurisdiction of no-deal outcomes to look at matters of great importance that are, nevertheless, outwith our previous debates on the tranches of SIs that deal with a no-deal scenario.

We come now to the important aspect of energy efficiency, a necessary and effective part of our infrastructure improvement to reduce and remove carbon emissions in the longer term. I always thought that it was a very key part of the Green Deal, introduced— I hasten to advise the noble Lord, Lord Fox—during the coalition years under a Liberal Democrat Minister of State in DECC, and it was to his great regret that it eventually collapsed, as we showed at the time, through very great difficulties in its construction.

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[Lord Henley]

The noble Lord would like a higher figure than the one we came to after considerable consultation—the increase from the £2,500 we originally proposed to £3,500, which is what these regulations are about. He has suggested, and I presume this is official Labour Party policy, a figure of £5,000. I suspect that if we had suggested £4,500 or £5,000, he would have suggested £6,000, so I do not think we can win on this. The simple fact is that we thought it right that those landlords who are not making any contribution should be encouraged or made to make some contribution. We are talking only about those 6% of properties that fall below the standard I set out in my opening remarks. The implication behind that is that the landlords of the other 96%—it is actually 94%, I am grateful to the noble Lord, Lord Fox—are doing the right thing, as any sensible landlord would do. It is not just about being good to their tenants—although that has an obvious benefit in encouraging tenants to stay and reducing the amount of void time—but much of the expenditure on improving the property will improve its capital value and be of benefit to the landlord. So although I believe, as a good Conservative, in the rights of property, I think it is right that we offer some encouragement to landlords—and this is more than encouragement—to spend money on maintaining their properties and ensuring that their tenants and the wider public benefit from improving the energy efficiency of those properties to at least band D and to higher bands in due course.

[Lord Grantchester]

I thank the Minister for stating that the added benefit of the rise from £3,500 to £5,000 produces a very considerable increase in the number of properties that would then comply. This would provide a win-win scenario whereby the tenant had reduced future bills for maintaining the property and the landlord saw an increase in the value of his property of more than £8,000: the impact assessment puts the increase at £8,500. Both these figures are considerably higher, so we would have preferred to have seen a £5,000 limit in the regulations.

[Lord Henley]

Again, I note what the noble Lord says; I imagine landlords up and down the country will be listening to his words. We had to make a decision based on a number of factors, but also on the viability of the whole sector. We did not want to see the whole sector being adversely affected on the basis of further modelling of the costs and benefits of the £3,500 cap. The noble Lord, Lord Grantchester, also asked why it had taken so long—four years, as he said—to lay this SI. It took time to build consensus among the wider stakeholder base and to consult properly, which on this occasion was welcomed by the noble Lord, Lord Fox.

The noble Lord, Lord Fox, then confused me by referring to the 2016 debate, implying—I am sure he did not intend to—that that was the debate on these regulations. That debate was to postpone the launch of the exemptions register by six months. It did not relate to this amendment to include a landlord contribution. All this does is to seek that the landlord should make a contribution. These regulations were debated in another place on 14 January this year. They were introduced by my right honourable friend Claire Perry, and it is open to the noble Lord to look at the First Delegated Legislation Committee from that date in Hansard. What happened in between? The 2015 regulations were made on 26 March 2015 and the provisions we propose to amend came into effect in April 2018.

The noble Lord then asked if the register will be made public. Yes, the register opened in 2017, and information registered on it is publicly available and searchable. The noble Lord, Lord Fox, regretted the inclusion of that in the £3,500 cap. We acknowledge that that has an impact on the scale of the improvements that can be delivered, but we nevertheless believe that that is offset by the increase from £2,500 to £3,500. The noble Lord, Lord Grantchester—being more severe than me—would like to take that yet further. Again, these are questions of balance and I believe we got it right with £3,500, even though the £3,500 includes that.

The noble Lord, Lord Fox, asked if the amending regulations are asking landlords to provide three installer quotes and whether that was making it too onerous and complicated. The requirement to provide three quotes applies only where the landlord is looking to avoid making any improvements and to register an exemption on the basis that even the cheapest improvement would exceed the value of the cap. Our analysis showed that virtually all properties can receive at least one measure costing less that £3,500, so we expect this exception to be invoked very rarely. The noble Lord will know that it is plain common sense to get more than one quote. If they are using it to seek an exemption, it is quite right that there should be three.

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[Lord Grantchester]

Will the Minister write to me on how many would be exempt and how many would fall into the regulations with which he says they would then have to comply? My understanding was that more would be exempt, and there were a very limited number of occasions on which property in multiple occupancy would have to abide by the regulations.

[Lord Henley]

I offer to write to the noble Lord. I will see if we have the sort of figures that he wants on HMOs and whether I can bring a bit more detail on that.

Finally, I make it clear that the Green Deal has not been cancelled. It still exists. The Government ceased funding it in 2015 but the mechanism remains active and private finance continues to operate in the sector.