Energy efficiency in social housing: guidance for landlords - revised 2020

10 Exemptions

10.1 The Scottish Government's starting principle is that all social rented properties in Scotland would benefit from being fully EESSH compliant by 31 December 2020. Furthermore, social landlords and tenants are part of the process that allows the investment to be carried out, and are expected to make every reasonable effort to allow the necessary work to take place. This is essential to ensure that the shared longstanding commitments to tackling fuel poverty and mitigating climate change emissions are achieved.

10.2 In what should be a small proportion of cases, landlords are able to use temporary exemptions from meeting the EESSH minimum ratings. It is for landlords to decide whether or not any property in their stock should be temporarily exempt. However, they must be able to show evidence to support exemptions to their tenants and to the Scottish Housing Regulator. Any property which has an exemption in place should not be treated as failing.

10.3 Where landlords decide that an exemption is required, they should still aim to install measures which improve energy efficiency for tenants to the best possible energy efficiency rating in the circumstances (unless the property is due for demolition) even if these measures will not result in the property achieving the EESSH minimum rating.

10.4 The Scottish Government recognises the following circumstances in which an exemption may be appropriate:

A. Technical

Some properties may have specific construction or design features for which existing energy efficiency measures are unsuitable and this may therefore prevent achievement of the EESSH within the target date. The incidence of this exemption is expected to be very rare as the EESSH provides flexibility for landlords on measures.

B. Social

In circumstances where tenants or owner occupiers refuse to participate in the installation of energy efficiency measures necessary to achieve the EESSH by the target date, then an exemption may be appropriate. This situation can also arise in mixed tenure property if owners are unwilling or unable to contribute to the cost of common works. In such instances the landlord must have made every reasonable effort to inform and explain to the tenant or owner occupier why the work is necessary, when it is being done, and why their participation and co-operation is so important. In such cases landlords should review the exemption when the property becomes vacant or owners move. Landlords should liaise with their local authority if support is needed to allow owner occupiers to participate in common works, to establish if the local authority is willing to provide grant funding, or pay missing shares. ^[26]

C. Excessive Cost

Where it is only possible to achieve the EESSH by installing measures where the cost far exceeds any possible benefit to tenants, then an exemption may be reasonable. Landlords may decide to set an absolute cost in the context of asset management strategies or affordability to tenants across all stock, and are free to consider and apply different approaches to assessing excessive cost, including:

• Timescale to realise benefits – an alternative approach is to evaluate costs against the long-term benefits to tenants. For example, a landlord may consider that the total projected savings in fuel costs should exceed the cost of the measure within a defined period (e.g. 7 years). The period used for this evaluation might be linked to the repayment for loan finance to support the measure. Landlords should take consideration of the forthcoming standard beyond 2020 in this assessment.
• Relative cost – another approach is for the landlord to evaluate the cost of the measure against similar investment in other property. A significantly larger investment to achieve a broadly similar result in a comparable property might in some cases be considered excessive.
• Combined costs – landlords may also factor in the potential cost savings of combining several measures or with other works such as repairs or upgrades. Costs may be considered excessive if the same result can be achieved more cheaply if postponed to a later planned programme of works.
• Demolition or disposal – there may also be cases where the cost of work exceeds the cost of demolishing or disposing of the property.

D. New Technology

As noted in para 5.12, landlords may want to invest in new technology that delivers improvements in energy efficiency considered to be at least equivalent to the benefits of meeting EESSH by established measures, even if the measures are not fully recognised in the SAP methodology. The evidence needed to support this is noted in para 5.12. Landlords should encourage suppliers to use the Annex Q route to ensure that the impact of new technology can be evaluated. An exemption may however be appropriate if there are reasonable grounds to consider that improvements in the evaluation of energy efficiency of buildings will recognise the impact of measures that have been installed.

E. Legal

There may be legal problems to overcome when embarking on a programme of energy efficiency works. If the necessary work required to achieve the EESSH cannot be carried out legally, then there will be grounds for an exemption. An example of legal issues would be where properties are listed buildings or located in historically significant areas which place restrictions on the installation of specific energy efficiency measures, for example solar PV.

F. Disposal

In the circumstances that a social landlord plans to dispose of a property, either through demolition or sale on the open market, and this has been formally agreed through the landlord's relevant governance arrangements, then the property will be exempt from the requirement to achieve the EESSH. If for any reason the landlord does not dispose of the property then it will be required to meet the EESSH.

G. Long Term Voids

If landlords are aware of any properties which will be void for a long period of time, and energy efficiency investment would not be appropriate, then the property should be considered exempt from the requirement to achieve the EESSH.

H. Unable to Secure Funding

If social landlords can show that funding for a necessary EESSH measure is not available, despite having made all reasonable efforts, and after consideration of the available funding sources, then the affected home may have a temporary exemption from meeting the standard (until such time as funding was available). In some cases it may be appropriate to seek an exemption where investment has been rescheduled to ensure compliance with the 2032 milestone, and this approach can be demonstrated to be cost-effective within an overall programme of work to improve the energy efficiency of the landlord's housing stock. Landlords also need to consider the impact on tenants of taking this approach. It is not appropriate to seek an exemption under this heading solely for delays in developing investment plans to meet the 2020 milestone.

Monitoring exemptions

10.5 Exemptions must be kept continually under review, since changes in technology, funding streams and legal parameters will allow dwellings which were previously exempt to become compliant.

10.6 Landlords should always consider alternative (and creative) ways to achieve the EESSH even if a temporary exemption appears to be the most obvious option. In the area of home energy efficiency, the technical and policy landscape is changing rapidly. Technologies can and will advance and new financial programmes, whether from government, energy providers or other sources, may come on stream and reduce the costs to the landlord of energy efficiency work which was previously considered disproportionate. Building and other regulations can and do change over time. Tenants and owners also change and this may present new opportunities.

10.7 The temporary exemption process does not in any way absolve landlords from their responsibilities to their tenants regarding the EESSH. If a robust EESSH recording system is in place, it should be a straightforward process for landlords to inform individual tenants by 31 December 2020 that their property is likely to be: a) passing EESSH; b) failing EESSH (in which case remedial action would be expected); or c) temporarily exempt from meeting the EESSH (but may be required to pass EESSH in the future subject to changes in the underlying circumstances that have led to the use of the temporary exemption).