Attitudes and perceptions of the Green Deal amongst private landlords in Rotherham

1. Attitudes and perceptions of the Green Deal amongst private landlords in Rotherham Jan Gilbertson and Aimee Walshaw CRESR 12th Dec 2012

2. Introduction • Based on findings emerging from ongoing research commissioned by RMBC and NHS Rotherham who want to understand the potential of the Green Deal to improve EE in the PRS • Provides valuable insights in private landlords attitudes and perceptions relating to the energy performance of their properties • Work in progress: insights shared today are preliminary and should be treated with caution. They are not yet in the public domain.

3. Overview • Background to the research: • energy efficiency in the PRS • the government's response (the GD and ECO) • the Green Deal and ECO explained • how the GD works in the PRS • Our research: • research design • emerging findings • Issues for implementation • What next?

4. The problem: energy efficiency in the PRS • The PRS is the fastest growing sector in England: number of households renting privately has risen by one million since 2005, to 3.4 million in 2010-15.6% of the housing stock. • But it also contains some of the poorest performing stock in EE terms: Properties with an F and G rating are more than four times as common in the private rented sector as in the social sector. • There are about 680,000 private rented properties in England with EPC ratings of F and G: over 40% of these households live in fuel poverty. • They are also amongst the hardest to treat: 40% of private rented homes were built before 1919 • Sources: EST (2010), Parliament UK (2012)

5. What is being done? • The Energy Act 2011 enables Government to regulate for energy efficiency improvements in the Private Rented Sector. • From April 2016domestic landlords should not be able to refuse requests from their tenants for 'reasonable' energy efficiency improvements • From April 2018all private rented properties should be brought up to a minimum EPC rating of E. Landlords would have fulfilled this requirement if they either reach E or have carried out the maximum package of measures funded under the Green Deal or ECO.

6. Principles of the Green Deal and ECO • Anationwide scheme to support take up of energy-saving home improvements and help meet the UK’s carbon reduction targets (Climate Change Act, 2008) • Aims to 'Pay as you save': whoever pays the electricity bills will pay for the improvements over time through their bills • 'The Golden Rule': Repayments will be no more than what a 'typical household' should save in energy costs • The Energy Company Obligation (ECO) will take over from Carbon Emissions Reduction Target (CERT) and the Community Energy Saving Programme (CESP). (Affordable Warmth replaces WF)

7. Principles of Green Deal and ECO(2) • ECO will provide EE measures to low income and vulnerable consumers and for 'hard to treat' properties (where the GR wouldn't work) • Overall, there will be less money available through ECO than through CESP and CERT • Will launch 28th January 2013 (originally planned for October 2012) • Local authorities grappling with implementation: some will become providers

8. Principles of Green Deal and ECO(3) • Summary of the process: If works fall within the Golden Rule Electricity bill payer makes repayments (including interest) An accredited GD assessor assesses property A loan of up to £10,000 can be taken out to fund some or all the works required If works will exceed Golden Rule or occupants are vulnerable/low income Cost of works funded by ECO (in part of full) Work conducted by accredited installer

9. Private landlords and the Green Deal • The electricity bill payer always makes the repayments • Landlords permission required before any improvements take place (they must also approve the financial arrangements) • Tenants permission required if landlord initiates GD • Landlords will have to make repayments while property is empty • New tenants will have to be made aware of the GD and acknowledge the repayments they will have to make

10. Our research • RMBC/NHS Rotherham want to understand the potential of the GD/ECO to improve EE in the PRS and how they might support take up • As part of their prep for the GD, they commissioned CRESR to explore with landlords: • their understanding of the EE of their properties • their attitudes towards the GD and ECO and the improvement of their stock more generally • the pros and cons of the GD and ECO and how they compare to previous initiatives • how likely they are to take up or support their tenants in taking up the GD • and where improvements have already been carried out, what benefits this has yielded • what role RMBC should play and how they might support landlords to take up the GD

11. Research design • A review of literature and practice relating to the GD, PRS and the role of LAs • 20 interviews with private landlords of various sizes. 10 of whom were general landlords and 10 who's properties had been improved under CESP (on-going) • 10 interviews with local stakeholders including LA Officers and elected members

12. Emerging findings

13. Awareness of energy performance • Two thirds of landlords interviewed were aware of the EP ratings for their properties largely as a result of the legal requirement to provide new tenants with an EPC • Those with long standing tenants were less likely to be aware • However, most respondents felt that tenants paid no attention to them, concentrating instead on size, location and price. • Two felt that these ratings were misleading as some properties, due to their age and nature, cannot exceed certain ratings • "We renovated the property when we bought it. Extended it, re-roofed it, put in gas central heating, insulated the loft and it's still only an E rating. It's misleading because with a period property like this that's about the best you'll ever achieve" (Small landlord)

14. Attitudes towards property improvement • Landlords conflated general improvements and EE improvements with the latter falling further down the pecking order than former i.e. they were more likely to install a new kitchen than insulation 'We re-wired, put in new kitchens, decorated and put in double glazing, what more can we do?' (Large landlord) • The installation of double glazing and central heating were more likely to be seen as 'priority' improvements by landlords as they are considered likely to increase demand • The increase in demand for private rental properties acted as a disincentive for property improvement

15. Perceived drawbacks of the Green Deal • Landlords perceived more drawbacks to the Green Deal than benefits. Their primary concerns were that: • it is not grant funded 'If there's a grant going I'll take it, but this is different' (Medium landlord) • they will have to make re-payments when properties are empty • the 'debt' attached to the property will deter tenants and buyers 'I know my tenants won't want to take on the debt. I think unless they see the savings instantly then they'll never go for it.' (Large landlord) • commercial (and uncompetitive) nature of the loan off-putting • potential upheaval for tenants while work is carried out • perception that GD will only fund insulation and that more expensive measures(such as boilers) would not be included

16. Perceived drawbacks of the Green Deal (2) • Fear of investing more money in the property than it's value can support 'I'm wary of trying to make a silk purse from a sow's ear. We've previously been quoted £68,000 to bring a £35,000 flat up to standard. It might get to the point where you think it would be more cost effective to pull some of them down and start again.' (Large landlord) • Trust in assessors and installers

17. Perceived benefits of the Green Deal • Some potential (mainly financial) benefits were also identified: • opportunity to pass some costs onto tenants' 'What this might do is to help tenants understand that Landlords are not a bottomless pit and open their eyes to the true costs involved in keeping these properties up to spec' (Large landlord) • fund improvements they could not otherwise afford/would 'eat' into equity 'I have some properties that don't have central heating and that would be a big job for me so this might be a way to get those done because I just don't have the twenty odd grand to do that'. (Large landlord)

18. Likelihood of take-up • The majority of landlords stated they were highly unlikely to take up the Green Deal • A smaller number were undecided but had serious reservations and just one respondent said they felt likely to take it up • However, around half of those rejecting the initiative and all who were undecided could see some potential benefits and scenarios where GD might be a useful finance mechanism • In the majority of cases, improving the EE of their properties for environmental or comfort reasons was seen as a luxury they could not accommodate • Grant programmes were obviously preferable and many respondents held out hope that they would qualify for ECO

19. The role of RMBC • More information on the detailed implementation particularly financial aspects and permitted measures • RMBC as an objective GD assessor • RMBC as provider or partner would reassure some landlords regarding quality • But some equally felt this would undermine competitiveness/VFM and would prefer a list of preferred contractors to select from • Broker more grant funded programmes and take full advantage of ECO

20. Issues for implementation

21. Issues for implementation • PRS most inefficient homes and yet the most challenging to engage • Generally EE is not seen as a priority • Landlords rarely see the benefits of EE in terms of tenants' warmth, comfort and health • Tangible financial savings? - benefits for tenants more likely to be increased comfort • How to encourage take up of EE measures? - evidence of benefits from CESP, use ECO first, role of RMBC as trusted assessor/partner

22. What next? • Interviews with landlords in the Ferham CESP area to: • identify benefits of EE measures • does CESP experience influence consideration of take up of similar EE measures under GD/ECO? • What about tenants? - evidence is also needed of the benefits to householders