Energy efficiency and condition standards in private rented housing: consultation analysis

Raising the standard to an EPC D from 2022

The consultation paper explains the Scottish Government's intention that the minimum energy standard would be raised to an energy efficiency rating of band D at the point of rental from 1 April 2022, and that this would apply to all privately rented properties by 31 March 2025.

Question 1.25 - Do you think that we should set out now the minimum energy efficiency standard after 2022? Please explain your answer.

Table 22: Question 1.25 – Responses by type of respondent.

Type of respondent	Yes	No	Don't know	Not answered	Total
Organisations:
Energy-related private sector	5				5
Landlord	8	12	2	6	28
Letting agents etc.	3	6		3	12
Local Authority	19	1	2		22
Other				4	4
Professional body	8	3	1	14	26
Third sector	7	1		3	11
Total organisations	50	23	5	30	108
% of organisations answering	64%	29%	6%		100%
Individuals	37	29	8	16	90
% of individuals answering	50%	39%	11%		100%
All respondents	87	52	13	46	198
% of all respondents	44%	26%	7%	23%	100%
% of all those answering	57%	34%	9%		100%

A majority of respondents, 57% of those answering the question, thought that the minimum energy efficiency standard after 2022 should be set out now. However, 34% thought it should not and 9% said they did not know. Overall, organisational respondents were more likely to agree than individuals (64% and 50% respectively) although a majority of landlord and letting agent respondents did not.

Around 125 respondents made an additional comment. Respondents who agreed often suggested that:

• Landlords need to be made aware that band E is only the first step and the eventual target is band D.
• Landlords should be provided with information to allow them to plan ahead, including deciding whether it is more economical to make all required improvements to achieve band D in one go.

It was also suggested that it might be desirable to look still further ahead, including setting out the Scottish Government's final target.

Other benefits identified for the proposed approach included that if landlords are encouraged to go straight to band D it will remove an enforcement step for local authorities and reduce disturbance for tenants.

Respondents who did not agree were most likely to argue that the effect of setting a minimum of band E should be evaluated before deciding on future measures. It was suggested that how successful the policy has been in reducing fuel poverty, the effect on supply, and the level of grant funding used should be reviewed before proceeding further.

Other respondents argued that achieving band E will be hard enough and there should be no attempt to go beyond this, or that it would be better to set a single goal rather than having a phased approach.

Several respondents argued that while it is desirable to set a clear goal for the sector, there is also a risk that targets might need to change in the light of external factors, such as developments in understanding of climate change or changed political priorities. It was also suggested that new technologies may become available. Making a provision for the Scottish Government to review targets at a later date was proposed.

Question 1.26 - Do you think that the next standard should be to meet an EPC of D at point of rental from 1 April 2022, and in all privately rented properties by 31 March 2025? Please explain your answer.

Table 23: Question 1.26 – Responses by type of respondent.

Type of respondent	Yes	No	Don't know	Not answered	Total
Organisations:
Energy-related private sector	3	1		1	5
Landlord	4	15	2	7	28
Letting agents etc.	1	7	1	3	12
Local Authority	12	4	3	3	22
Other				4	4
Professional body	4	9	2	11	26
Third sector	4	3		4	11
Total organisations	28	39	8	33	108
% of organisations answering	37%	52%	11%		100%
Individuals	21	43	9	17	90
% of individuals answering	29%	59%	12%		100%
All respondents	49	82	17	50	198
% of all respondents	25%	41%	9%	25%	100%
% of all those answering	33%	55%	11%		100%

A majority of respondents, 55% of those answering the question, did not agree that the next standard should be to meet an EPC of D at point of rental from 1 April 2022, and in all privately rented properties by 31 March 2025. However, 33% did agree and 11% said they did not know. Overall, organisational respondents were more likely to agree than individuals (37% and 29% respectively). A majority of landlord letting agent and professional body respondents did not agree.

The Shelter Scotland report asked private tenants if they agreed with the dates for starting to apply the minimum standards of E (as at this question) and D (as at the next question. Of the 24 private tenants who answered this question, 14 thought the dates are too far away. Nine thought the proposed dates were fine and one tenant thought the proposed dates were too soon.

Around 120 respondents made a further comment. Respondents who agreed sometimes suggested the proposals are reasonable or logical and would give landlords sufficient time to plan for the necessary work. It was also suggested that the 3-year cycle would be particularly appropriate if enforcement is linked to the landlord registration system. Others who agreed qualified their approval as being subject to revision to EPC methodology, to there being exceptions for technical or legal difficulties, or to there being no intention to move beyond band D.

Commenting on the relationship between the PRS and other sectors of the housing market, respondents both suggested the move to band D will close the gap with the social rented sector, and also that requiring owner-occupiers to reach band E would have a greater effect than asking the private sector to achieve band D.

Irrespective of their answer to the Yes/No question respondents also proposed specific alternative targets and time frames, often reflecting answers given at earlier questions. Suggestions, each made by only one or a very small number of respondents, included:

• Band D should be set as the minimum standard for new tenancies from 1 April 2021, without an interim of band E.
• Band D should be introduced from April 2019 with backstop after 3 years.
• Band D should be introduced from 2021 without an interim of band E, with a backstop date of 2024.
• Band D should be introduced for new tenancies from 2019 and for all properties from 2025.
• The backstop date for band E should be 31 March 2021, and for band D, 31 March 2024.
• The backstop date for band D should be 31 March 2026.
• The standard should be raised to C or B rather than D.
• There should be a single target and only one set of compliance dates.

Amongst respondents who did not agree with the measures proposed in the consultation paper, the most frequently made comments were:

• This is too soon. Suggestions for an appropriate delay ranged from 1-2 years to 10 years.
• The Scottish Government should concentrate on achieving band E and then review implementation.
• There should be no attempt to raise the standard above E.
• Band D is unrealistic especially for older property.
• Availability of housing stock in the PRS will be reduced.

Several respondents commented specifically on the difficulty of achieving band D for property off gas grid, arguing that EPC methodology must be reformed. Other issues raised included concerns about the availability of skilled labour, given the Scottish Government's estimates of the number of properties involved.

A much smaller number of respondents argued that the minimum standard should be higher than D or achieved earlier or should be same as for social landlords.

Finally, the details around implementation were queried:

• The need for separate change of tenancy and backstop dates for the second phase of legislation was questioned, and March 2023 or March 2024 suggested as the date for compliance.
• It was also suggested there may be potential for overlap and confusion with the Band E compliance backstop date and the point of rental post 1 April 2022, resulting in repeat assessments and works being required in quick succession. Setting 31 March 2025 as the date for Band D compliance was suggested.

Question 1.27 - When increasing the standard to EPC D, we propose that the cost cap will be £5000 for properties with an EPC of E, and £10,000 for properties with an EPC of F or G (which would include any spend made to improve the property previously following a minimum standards assessment). Please tell us your views about this proposed cap.

Around 145 respondents answered Question 1.27. Respondents who indicated agreement with the proposed caps sometimes suggested the figures are fair, reasonable, realistic or appropriate. It was also noted that anyone bringing property to the rental market after 2022 should be aware of the requirements. It was also suggested that the level of the cap should be reviewed in the light of increased costs of materials or labour and an annual review, in line with the Consumer Price Index was proposed.

The estimated cost of improvement works presented in the consultation paper were considered to be too low by several respondents. It was sometimes concluded that, in terms of achieving the intended improvements, the cost cap would be too low.

A number of respondents argued there should be no cost cap. It was suggested that: the only exceptions to the standards should be on technical or legal grounds; landlords are involved in commercial activity and are maintaining an asset even if not making a profit; and that there are few industries where being unable to the afford cost of regulation results in reduction of required standards.

Many respondents expressed a view that that the proposed caps are too high especially in rural areas. It was suggested that the required investment will not make commercial sense for some landlords, or that, in some cases, a landlord will be left with no profit for several years. As a result, it was predicted that property will be withdrawn from the private rental market or that rental prices will be driven up. Lower level caps, and specific caps for rural property were suggested.

Many other points raised with respect to the level of the cost cap and what it should include were essentially the same as those made at Question 1.22, primarily that:

• A flat-rate cost cap is unfair, particularly for small properties in rural locations, and that the cap should be related to factors specific to the property including value, size, location, and rental income.
• The costs of secondary works and VAT should be included.

Several respondents raised issues relating to grant funding:

• That grants or loans should be available to support landlords.
• That the cap should be the amount the landlord is expected to pay and should not include grant funding that may be available.
• That grants should be available to ensure that properties requiring more than £5,000 of spending are upgraded, for the benefit of tenants.
• That clarification is required as to whether it is intended that the cap should include or exclude grant funding.

Other points on cost caps included:

• There could be a risk of partial completion of works or piecemeal implementation of measures. The importance of a "whole house" approach to improving energy efficiency was highlighted.
• The disproportionate effect on rural estates, which are likely to have a large proportion of affected properties should be considered.
• Consideration should be given to how long a substandard property should be allowed to remain in the sector. While long term exceptions for historic and listed properties may be appropriate, other hard to treat properties should not remain in the sector or unimproved indefinitely.

Question 1.28 - What are your views on the provisions in general for exceptions to the D standard, including that a property which has an exception from meeting E should not automatically be excepted from meeting D?

Around 115 respondents answered Question 1.28. Around 1 in 3 respondents argued that a property which has an exception at band E should automatically be excepted at band D, including that a property that cannot meet band E will not meet band D. It was suggested that to insist on a further MSA would be a waste of money.

Around 1 in 4 respondents stated general agreement with the proposals, or specified agreement that the exceptions should stay the same as for band E, or that a property should not be excepted automatically at band D because it was excepted at Band E.

Reasons given for not allowing an automatic exception at band D included that:

• A measure that was too expensive in 2019 would not necessarily be so in 2022.
• The additional spend expected before exception at band D means a property excepted from E shouldn't automatically be excepted from meeting D.
• The measures required for reaching a higher standard may be different and the reasons for the original exception may no longer be applicable.

Other respondents suggested that whether the exception should be extended automatically would depend on reason it was given originally. It was observed that exceptions on technical grounds or because of a property's listed building status are unlikely to change.