We look at calls for changes to fuel poverty legislation, the continuing debate over who should pay for fire safety work on tower blocks, the latest landlord data and a call for new landlords to be subject to tax changes in a bid to boost home ownership.
Government to consult on energy efficiency
Peers have held a Second Reading debate on the former CLG Minister, Lord Foster of Bath’s (Liberal Democrat) Domestic Premises (Energy Performance) Bill.
This is a Private Member’s Bill which seeks to:
- Put an existing fuel poverty target into primary legislation. Currently, the Fuel Poverty (England) Regulations 2014 require the Government to improve the energy efficiency of homes for people living in fuel poverty. The properties in which they live must have a minimum energy performance certificate (EPC) band C rating by the end of 2030. This date could be changed through secondary legislation. The bill would require in primary legislation the secretary of state publish and implement a strategy to deliver on this specific 2030 target.
- Make it a legal requirement for the government to meet a further target: that as many homes as possible are improved to EPC band C by 2035. This target is not currently set out in legislation.
- Introduce other provisions including: enabling the Secretary of State to require mortgage lenders to provide information on the energy performance of properties in their portfolio; and new requirements concerning the energy efficiency of new heating systems installed in existing properties.
Lord Best of Godmanstone (Crossbencher – President of the Sustainable Energy Association) argued that energy standards in the private rented sector are “proportionately at their worst levels”.
He went on to argue that: “The underlying problem is that the upgrading of properties in the private rented sector does not directly benefit the landlord, because more energy-efficient properties seldom generate higher rents.”
He added: “I suspect that the necessary co-operation of the private rented sector will be forthcoming only if the government accept the painful necessity for significant grant-aiding or serious tax concessions for PRS properties.
“The Bill is flexible on ways and means and can accommodate such governmental help. Its principles remain absolutely right.”
Lord Redesdale (Liberal Democrat) spoke of his own experiences as a landlord in improving the energy efficiency of rental accommodation.
He said: “I always have difficulty with the expression “fuel poverty”, because it mixes the cost of fuel and the use of fuel.
“One problem we have of course is that, if the price of gas is low, then fuel poverty is seen as less of an issue, but fuel expenditure increases because people raise the temperature in their houses.
“This is not to denigrate the issue of fuel poverty; in fact, it was brought to me in stark relief when one of my tenants came to me to say that they were paying more year on year on their energy bill than on their rent.
“There was of course a simple solution—though not the solution that immediately springs to mind for many private landlords—which was to look at how I could increase the energy efficiency of the building.
“It was a complicated building to look at, being in a rural area and having been built over a number of centuries, but I realised that work needed to be undertaken.
“We did that work, but of course it had a 14-year payback compared with the rent. This is an issue that landlords often face.
“I believe there is an obligation on landlords that, if they cannot afford to rent out a property and the works, they should not own the property in the first place. That is a fundamental issue: we should not be pushing fuel poverty as an excuse.”
In responding to the debate, the BEIS Minister, Lord Duncan of Springbank, told the House that the government “will consult on raising minimum energy performance standards in private rentals—again, as a number of noble Lords mentioned today, private rentals are perhaps the most difficult to reach of all properties, since they are in the hands of a large number of individuals.”
He went on however to confirm that the Government is not supporting the Bill.
Commons Library Paper on fire safety
The House of Commons Library has published a briefing paper considering the debate about who is responsible for paying for fire safety works on blocks of flats in the wake of the Grenfell Tower fire.
It has been updated to include progress in implementing the government decision to fund remediation work for affected blocks with ACM cladding in the social and private sectors and can be accessed here.
Tax changes impact on landlords with small portfolios
An analysis of HMRC data has revealed that the number of small buy-to-let landlords has dropped for the first time in five years.
Business advisory and accountancy service Moore, which has undertaken the analysis, says the number of buy to let landlords with between five and nine properties fell to 157,000 in 2017/18 down from 159,000 the year before.
Moore explains that cuts to tax relief and other increases in stamp duty introduced by the government since 2015 have been driving out smaller landlords from the buy to let market.
The number of landlords who let 10 or more properties remains unchanged at 43,000.
Jonathan Green, a partner at Moore says: “For some small landlords the latest tax relief cuts are likely to be the final straw, pushing them out of the market.
“Investment by small buy to let landlords has helped to improve the quality of rented properties in the UK – driving them out of the market could have a negative impact on tenants.
“Changes to the tax regime, such as cuts to reliefs and hikes to Stamp Duty Land Tax, will always be felt disproportionately by smaller landlords. Rental profits have been squeezed to the point where buy-to-let no longer makes financial sense for some.
“Buy to let landlords with smaller portfolios make up a huge part of the rental market. If their numbers continue to fall it could create a supply deficit which may result in higher rents longer term in some areas.
“Larger, more professional landlords, look to be unphased by legislative changes in recent years – bigger margins mean these changes can be more easily absorbed.”
Leading Conservative thinker says tax system should favour home ownership over renting
Neil O’Brien MP (Conservative, Harborough – Board Member for Onward and former Director of Policy Exchange) has an article published today on ConservativeHome saying the only way to boost home ownership is to target new landlords.
He said: “The only way – and I mean the only way – that we can get home ownership up by the next election is by changing the balance between rented and owner-occupied housing.
“From 2002 to 2015 we saw a relentless collapse in home ownership (from 71 per cent to 63 per cent) as the growth of buy-to-let outstripped new supply.
“In 2015, we started phasing in limited changes to the tax treatment of buy-to-let and second homes. It worked. The collapse stopped. Ownership has even ticked up slightly, to 64 per cent. But that’s still low. Ten countries in Europe are over 80 per cent.
“We don’t need to, and shouldn’t, change things for existing landlords who have invested on the basis of the current rules. But we must use the tax system to encourage new investments to flow into companies, not into inflating house prices. To favour owning over renting.
“We either do this, or we will fail to increase ownership, and we’ll drive young people into the arms of the Corbynistas. Simple as that.”