A Green Revolution

21st July 2011

Earlier this month British Gas made the chilling announcement that they will be increasing their domestic gas and electricity prices by 18% and 16% with the expectation that other energy suppliers will follow suit. This has left many home owners, many of whom are still feeling the strain from last winter’s heating bills, wondering how they are going to find the extra cash to keep warm this winter.

Government figures have shown more than a fifth of all households in the UK were affected by fuel poverty in 2009. Fuel poverty is when homeowners have to spend more than 10% of their income keeping warm. The Department for Energy and Climate Change (DECC) predicts the numbers for 2010 and 2011 will increase because of further rises in the cost of energy.

“This icy prediction provides little comfort to the many households who are already feeling the pinch,” Robert Moore Rural Practice Surveyor at George F. White who here considers how new government proposals may affect tenants and landlords in the future. “As we all start to pay more for our fuel, we must ask ourselves the question; are we doing our bit to reduce our increasing cost for warmth? Nationally “between two and three billion pounds’ worth of energy is wasted every year because our homes are poorly insulated and inefficiently run” Chris Huhne, DECC secretary commented in the House of Commons recently as he fleshed out his proposals for the soon to be adopted ‘Green Deal’ which he hopes will encourage home owners to make their properties more energy efficient.

Put simply, the Energy Bill introduced to Parliament last winter includes a provision for a new ‘Green Deal’ which is the governments plan for an energy efficiency makeover of thousands of British homes. Huhne believes this will revolutionise the housing stock, by establishing a framework which enables private firms to offer consumers energy efficiency improvements to their homes, with such costs being recouped through a charge in instalments on their energy bill. When people move on, the charge stays with the property. Households will be offered loans to install, for example, insulation, new boilers and double glazing; anything which improves the energy efficiency of the property and reduces carbon emissions. And it’s not just homes which have been targeted, business and community property will also be affected. Like any loan, there are important prerequisites which will be embedded into the deal, starting with the ‘golden rule’; the expected financial savings must be equal to or greater than the costs attached to the energy bill. The energy efficient measures should be approved by an accredited, objective advisor, with the installation carried out by an accredited installer.

Huhnes’ proposals sound like a win-win scenario for both the private companies benefiting from the work and the consumers who get an energy efficient home. But for it to work, energy efficiency must be valued. Companies will need to engage in the scheme and consumers will need to become interested in borrowing money to get the work done.

Whilst the backbone of the Green Deal has been firmly established, the detail still requires further debate and consideration before it is finalised, with the legislation not due to be debated before Parliament until spring next year. Of course, for any new scheme as revolutionary as this to firmly take effect, assertive measures in the form of deadlines and penalties usually follow sharply behind and this time the Landlord seems to take the hit. It has been suggested that from 1st April 2016 landlords will not be able to refuse reasonable requests from tenants, or local authorities acting on their behalf to improve their property for energy saving purposes. So if for example, a tenant requests such an improvement, it becomes installed, and then the tenant decides to move on, the repayment of such an improvement will stay with the property. To date, it seems that no provision has yet been considered if the property becomes vacant for a period of time.

A second deadline has been suggested that from the 1st April 2018 the government will make it unlawful to rent a house or business premises which has an energy efficiency rating below band ‘E’. Under this proposal Landlords will have to ensure that their properties meet these requirements in good time so that potentially no income is lost. Whatever the final outcome of the proposals, at present landlords who make these kind of improvements may qualify for up to £1500 under the Landlord’s Energy Savings Allowance. The scheme is in operation until 2015 so it could be worthwhile undertaking such work now in light of the fact that it may become compulsory in the future.

To date, property which struggles to meet these requirements due to being of a heritage nature or of other special circumstance has not been considered, although early indication is that they will also have to comply with this regulation.

The detail of the scheme is awaited with anticipation, however we must remember that whether a Landlord or Tenant, under this scheme it will be vital that any proposed improvement is installed with appropriate consent and has the desired effect on the property – to reduce energy consumption and above all reduce energy bills. Of course, such improvements are also likely to have the added benefits in terms of capital value provided any savings in energy bills outweigh the cost of the improvement over the length of the loan. The ‘Green Deal’ has the potential to create a revolution, but let’s remember we need a good deal – not just a green one.

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