This thread is to pick up some questions raised about the tensions / returns / disincentives in landlords improving (or not) the energy efficiency of their rented properties. It is a complex issue.

Until recently, we had the Green Deal, where

That was a dog's breakfast which was killed by several things:

1 - It was very complex, based on loans taken out at highish rates to be paid off by savings on the energy bill.
2 - Tenants didn't see why they should continue to have higher bills to pay to invest in the Landlord's property. Irrational, since they are no worse off, but very understandable.
3 - There was a lot of upfront bureaucracy.
4 - The enviroment rapidly became low-interest.

Problems in the market are:

1 - Energy savings are not visible enough to justify a higher rent up front. Tenants will still plump for the lower headline rent, and live to regret that they have chosen a property with energy bills costing perhaps Ă‚ÂŁ1000 extra per year.
2 - EPC reports, which have some value in documenting what is present in a house (eg insulation levels) do not affect rent levels, so there is no financial incentive to improve and invest.
3 - I am familiar will tenants telling me how warm and relatively inexpensive my properties are to run, but it usually happens after they have left and had a winter living somewhere else, which does not help in finding new tenants to pay the slightly higher rent (less than they will save on bill savings) at new tenant time.

(FWIW I target my properties to be a decent D, and ideally a C. A mid-D can be done even in solid walled terraces with good normal measures.)

The Landlord's Dilemma

So we are stuck with the LL in a cleft-stick between:

1 - Energy Improvements costing money.
2 - Any benefits of investments made accruing to the T, while the LL cannot recover any extra rent due to the lack of visibility in the marketplace mentioned above.

And there is a requirement for rentals to be at least an E from 2018, a D from 2025, and a C from 2030.

(IMO for some properties a C will be very difficult to meet without *major* investment).

How to square this circle?

Ferdinand

Posted By: gravelldNot sure if it's of any help but Sustainable Homes did some work on this over the past year:http://www.sustainablehomes.co.uk/sustainable-buildings-pay-in-terms-of-rent-and-occupancy/" rel="nofollow" >http://www.sustainablehomes.co.uk/sustainable-buildings-pay-in-terms-of-rent-and-occupancy/

This talks about a 10-year study of 300 U.S. and Canadian office buildings and social landlords in the UK, given that social landlords don't need to may a profits to eat, it does not save anyone useful for private sector housing landlords in the UK.

Posted By: ferdinand2000 how warm and relatively inexpensive my properties are [...] does not help in finding new tenants to pay the slightly higher rent (less than they will save on bill savings) at new tenant time.

Have you seen any change in interest in this? Do you make it a feature in your adverts?

I would be interested in your figures, do you know what they are approximately? Ă‚ÂŁ1000/year in energy savings seems excellent, what did you do to achieve this? How does this it compare to how much more the rent is?

Posted By: Rick_M

Posted By: ferdinand2000how warm and relatively inexpensive my properties are [...] does not help in finding new tenants to pay the slightly higher rent (less than they will save on bill savings) at new tenant time.

Have you seen any change in this attitude? Do you make it a feature in your adverts?

I would be interested in your figures, do you know what they are approximately? Ă‚ÂŁ1000/year in energy savings seems excellent, what did you do to achieve this? How does this it compare to how much more the rent is?

Indeed, this thread needs ventilating as the condescension is dripping off the wall and ceiling

The social landlords that have built passivhaus say it as much about reducing rent arrears and general improvement in tenant behaviour because people don't want to have to leave. But I don't know how much that translates to the world of private landlords.

Daiking
>Indeed, this thread needs ventilating as the condescension is dripping off the wall and ceiling

I don't think that is quite fair. I am quoting real world examples and if you are ever driving through Notts/Derbys on the M1 I will happily introduce you to the tenants concerned.

Surely complaints which we make from time to time about "eco houses" not getting a premium price to reflect their lower running costs are equally condescending to the whole public?

Tenants at least have a good reason for not understanding about the technicalities of maintaining houses and how to minimise running costs because that is primarily not their responsibilty but the LLs; owner occupiers have that responsibility and accordingly lesser excuse for being ignorant.

The fact is that a lot of people do not have the desirable knowledge about all these details.

I'm interested in creating a debate about how to fix the issue, or at least work around it.

I trust we all agree that Green Deal was an abject failure. I'd say that was because the cost and benefit were perceived as going to different people. Now Green Deal is dead (good!) we still have the same issue but the other way round.

I am looking for answers and I don't care if it is perceived as sounding condesending or not, as long as I get some of those.

Posted By: Rick_M

Posted By: ferdinand2000how warm and relatively inexpensive my properties are [...] does not help in finding new tenants to pay the slightly higher rent (less than they will save on bill savings) at new tenant time.

Have you seen any change in this attitude? Do you make it a feature in your adverts?

I would be interested in your figures, do you know what they are approximately? Ă‚ÂŁ1000/year in energy savings seems excellent, what did you do to achieve this? How does this it compare to how much more the rent is?

I have not got an answer to the getting people to understand the total cost of a place rather than the headline rent. The same thing is a problem for owner occupiers buying new houses not look at the lifecycle cost.

One could leave it unimproved for the first winter, I suppose, but that would not be nice.

In the meantime, houses with solar panels and external wall insulation are perhaps good long term investments for when the value *is* appreciated in the future :-) .

On the figures, I documented a fair bit of the debate on a thread on here when I first joined called Little Red House:
http://www.greenbuildingforum.co.uk/newforum/comments.php?DiscussionID=11560

The particular one is a small 2up2down detached solid walled cottage in a large garden. When T moved in in 2010 the gas + elec bills were about 55-58 per week (>50% of rent). We just did the basics that anyone on here would know to do to a solid walled single glazed house.

- Good double glazing and upvs doors.
- Loft insulate.
- PIV to flush out humid air (condensation problem), so make heating it up less energy instensive.
- Board out walls where possible and as and when TY redecorated. I had one done in a room the T was redecorating two weeks ago.
- Get T to replace Washer Dryer (couple of loads a day) with separates.
- Added well insulated sun lounge which covered a big chunk of solid wall.

Bills are now approx Ă‚ÂŁ120 a month with 50% more floor area, and I think that is comparable (ie T has not switched). Still highish imo, but it is that type of property.

Ferdinand

Posted By: gravelldI don't think it's that different to the wider retrofit problem really. It cannot be justified on a financial basis. The only thing that can change that is energy spiking in price (a lot), or Government stepping in to fix it as investment spending.

What I would say is that a LL should surely strive to produce an easy to use product and can get away with less. Where possible, there shouldn't be the need for education. The house should "just work". It should keep you comfortable and healthy without you having to do anything. You can argue existing houses don't work either, but that's the goal I believe.

Yes ... generally agree.

But there is a lot that can be done to slant the setup towards encouraging investment. Requiring EPCs to be available before a tenancy is a teeny-tiny baby step in the right direction.

It needs something which is a major encouragement as the rate of improvement is real but too slow. And I don't think the predeliction of politicians with spanking landlords actually helps tenants. I would support something *like* variable stamp duty based on EPC, or a reduction in the LL extra 3% stamp duty to match investment goes on energy efficiency.

I don't think you can say a house should "just work" because lifestyle can affect any house .. even simple stuff like washing on radiators. Agree with the goal though.

There's a related issue with the pool of poor owner occupied houses which feed in to and out of the PRS. It will be interesting to see what happens as rented homes are required to get better and better. I predict a tail of unimprovable Es and Fs becoming owner-occupied slums as they are unlettable by law.

Ferdinand

Posted By: ringi
Now if we started to print money to fund it, the value of the pound would go down so it would help our exports….. (Please tell me if this is Trump’s or Corbyn’s way of thinking?)

Well it won't be Trump's idea of a good way to spend money, but Corbyn has shown support for it, talking about 1â„… loans and allowing the GiB to find domestic projects. I think Germany has done something similar.

I'm of the rather cynical view that the political class don't like it and don't entertain it because it contradicts the simplistic worldview that most of them have - that the market will magically solve it. We all hate it when deeply held beliefs are questioned, it's very human. Must be a cognitive bias name for it.

Absolutely, but that's 'good investment'. Saving energy is 'bad investment'.

Posted By: ferdinand2000For 3.5k you (or, t least, me) can A-rate double glaze a normal solid-built mid terrace (5 or 6 windows plus 2 doors) and fit a PIV and insulate the loft (if that last is nearly free). That would be a big difference. Boarding out or EWI is more tricky.

But what is the point knowing that in a few year time the required standard will be increased again, but without any rent increase to pay for the next set of work....

Posted By: gravelldIsn't that a risk you take as a landlord? One reason I won't touch the sector.

It one of the reason I will not touch the low end, but someone has to, otherwise the roof will just be taken of the homes (so no council tax to pay) and the tenants will be rehoused in shop doorways!

Posted By: gravelldI didn't realise all landlords were so altruistic

We are not, but the landlords who own the properties in the cheap areas often own 20 or 30 of them, and tend to have large mortgages so if they are forced to spend a lot, they tend to "go under" (after moving their money to say Turnkey and leaving the UK). Then if the mortgage companies can't sell the properties, as the cost of making them legal for the next 30 years is more then they are worth....

Property prices and rents have not gone up in a lot of areas in the last 15 years, and lots of landlords took 95% mortgages based on inflated "values".

Also "nice" people are not able to cope with the type of tenants you get in those areas, hence I will not touch the cheapest areas. (A baseball bat is not a legal tool for a landlord, but as the legal tools are removed you get left with landlord that are willing to use the baseball bat.)

Posted By: ringi

Posted By: ferdinand2000For 3.5k you (or, t least, me) can A-rate double glaze a normal solid-built mid terrace (5 or 6 windows plus 2 doors) and fit a PIV and insulate the loft (if that last is nearly free). That would be a big difference. Boarding out or EWI is more tricky.

But what is the point knowing that in a few year time the required standard will be increased again, but without any rent increase to pay for the next set of work....

I think there will be a rent increase, because supply would fall with no indication of a fall in demand. People who can't get credit for mortgages, or have CCJs, or can't save (or are in process of saving) deposits will still exist.

(A properly functioning market is one of the things that would help generally, but there is insufficient supply even now - never mind after a lot of houses have been excluded.)

A parallel example of widely imposed costs increasing rents may be in 2012-3 when the Scottish Govt banned Lettings Agency fees of all kinds, so (theoretically) the LL would have to pay them. While it was populist, they didn't seem to understand tax incidence (*), and that the work still had to be done and paid for out of the money coming from the tenant, so the next year Scotland suddenly became a region with a faster increase in headline rent than others.

ISTM that all they had done was remove transparency from the market in fees, so making it harder for people to choose the lower ones and removing competitive pressure. But it mad the campaigners and the politicians happy, I suppose.

Ferdinand

(*) https://en.wikipedia.org/wiki/Tax_incidence

Posted By: ferdinand2000I think there will be a rent increase, because supply would fall with no indication of a fall in demand.

But the rent level is set by the housing benefit level at the bottom of the market, and housing benefit rates has been fixed for the next few years at least...... (To drive the poor into taking jobs, but the jobs are in the south, and the empty proprieties are in the north.)