Green Grant - An Opportunity Missed
The latest government green housing initiative starts this month – whilst other landlord groups have hailed it positively, we see it as an opportunity missed and confirmation that central government really do not understand landlords or our business.
What Is The Green Homes Grant Scheme?
The scheme was announced in the Chancellors Summer Statement and starts September 1st, 2020. The scheme will see the Government provide at least two-thirds of the cost of improvement work for homeowners and landlords to make their properties more energy-efficient. A cap of up to £5,000 per household will apply, which increases to £10,000 for low-income households in the owner-occupied sector. The scheme is estimated to cost the tax payer £2 billion and aims to support over 100,000 green jobs with the objective of upgrading over 600,000 homes across England, saving households hundreds of pounds per year on their energy bills.
That sounds great doesn't it, but then you look a little deeper and find that it is focused on insulation and low carbon heat and other measures, such as draught proofing, windows and doors and heating controls can only be included up to the value of any improvements to insulation and low carbon heat.
So What Is The Problem?
Progress is made in this industry in two ways, encouragement and regulation. Professional landlords invest in their properties and keep them current as they know that long term, this is the only way to get a fair return on their investment. Other landlords tend to operate on a lowest cost model where they spend as little as possible for as long as they can get away with it.
Grant schemes are great for professional landlords as it can encourage them to invest in areas where the return or reward is not obvious whereas regulation is needed to set the bar below which the other landlords are not allowed to operate.
This scheme focuses on insulation which professional landlords will have invested in years ago and low carbon heating which is not something that can be easily installed in a tenanted property, so most professional landlords will see no benefit or opportunity to improve their properties as a result of this new scheme.
What Would Work?
Firstly, we need a roadmap. There is talk that all properties will need to be 'carbon neutral' by 2050. There are a number of ways that could be achieved – you could argue that a draughty shed which is powered with sustainable electricity is carbon neutral, but realistically we are talking about changing homes such that they use as little energy as possible, altering those homes so that they produce and store at least some of their own energy and changing heating to sustainable energy which does not add to the worlds carbon footprint with the very appealing side effect that it will be a much warmer home for your tenants to live in and it will have much, much lower energy bills.
So lets be clear – there is talk of 'EPC rating A-D good, you can let; E or below, unletable' being introduced by 2025. What we need is a clear road-map for those who need to be regulated, to show where the bar is now and where it will be over time. Say 2025 only properties with an EPC rating of D or better will be allowed, in 2030 this will rise to C or better, 2035 B or better, 2040 A and full carbon neutral by 2050.
What would be the benefit of having such a road map? Well, firstly the bar would be set below which the worst landlords could not operate – ensuring a regular update of properties and continual improvement that we don't see today in some sectors. Secondly, knowing a bar is there – any property that will fall below it will lose value, so the incentive to keep it up to date is enhanced as no one wants to lose money on property, let alone find their property is unsalable. Finally, there are too many who see being a landlord as a get rich quick scheme – they somehow get 'onto the ladder' with insufficient funds to properly develop and enhance their property and then make ends meet by spending nothing on its upkeep or maintenance. If properties had to be continually upgraded to stay current for the next 30 years, the false belief that landlording can be done on the cheap would be lessened, with the potential outcome that the number of badly run and managed properties would be reduced.
Once a clear road-map is in place, with the possibility that timelines will be shortened as they were with petrol and diesel vehicles (from 2040 originally to 2035 now), the 'stick' for those that need to be pushed is in place, we then need to look at the 'carrot' for the better landlords to help them move forward toward a carbon neutral operation as quickly as possible.
We Need Holistic Solutions
There is a place for a focus on specific technologies. You could argue that solar PV usage would not be as common if the government had not focused on it and encouraged it a decade ago. But whether we do this or not, we need for it to be part of a wider package that encourages all forms of improvement based on relative priority or the gains for any specific property.
The way to do this is to start with an 'Energy Audit' – think of it as an EPC on steroids – a comprehensive analysis of a property, how it is built, how much energy it uses and how and where that energy is lost. Based on this a comprehensive plan can be built covering options to get from wherever that property is now to a full 'carbon neutral' status (and carbon is fine, but methane, particulates and a host of other negatives need to be included too).
The problem with getting an 'Energy Audit' today is that too few people are qualified to perform them and they are not quick of simple, so for many it will be an expensive outlay with no immediate return.
What Might An Energy Audit Recommend?
Predicting how houses will be built in 2050 is obviously impossible, however it is clear that investment in 'retrofit' of existing houses has been low in the past but this will need to change if we are to bring current houses up to standard in that time-frame.
On a recent call, attended by over 600 architects and property professionals interested in the 'retrofit' industry, attendees were asked to prioritise new technologies which may be important enablers in getting current housing up to 'carbon neutral' standards. The most popular development for those attending was Mechanical Ventilation with Heat Recovery (MHVR) & demand controlled Mechanical Extract Ventilation (MEV).
One of the big issues with older houses is that they were designed to breathe and if you seal them, they will rot – yet we have to find ways to seal the areas we inhabit so we don't lose heat unnecessarily whilst letting the house breathe and in a way that raises overall insulation levels. The 2nd and 3rd most popular technologies on the call were a 'tea cosy' solution which will be particularly appealing to landlords and surprisingly, 'air tightness tape'.
Simply put, a 'tea cosy' is an external covering on an existing house which effectively insulates it without the need for major internal changes or disruption and 'air tightness tape' is pretty much what it sounds like – it is the new generation of tapes that when used over joins will guarantee an air tight seal.
We will cover these technologies in more detail in future articles along with the obvious questions like, "Is your 1980's double glazing due for replacement" and how do you avoid damp and condensation if you seal a house and how can it breathe if it is sealed, along with the much more important question of how much will all of this cost and how on earth are you going to pay for it.