NLA won’t endorse new cost cap for energy efficiency improvements

The government’s proposal to introduce a cost cap of £2,500, down from £5,000, on the amount any landlord would need to invest in an individual property to ensure that an existing property meets new Minimum Energy Efficiency Standards (MEES) being introduced on 1st April 2018 has been welcomed by the National Landlords Association (NLA) as a step in the right direction. But the trade body says that it will not endorse the introduction of any cost cap.

A new consultation was launched yesterday on plans to amend upcoming minimum energy efficiency standards so that landlords could no longer exempt their property due to a lack of third-party funding.

The Department for Business, Energy & Industrial Strategy (DBEIS) is proposing amendments to the domestic minimum standard regulations by removing the existing ‘no cost to the landlord’ principle and introducing a ‘landlord funding contribution’ component where a landlord is unable to obtain suitable ‘no cost’ funding.

If new plans are approved, landlords would be expected to financially contribute, up to the level of the £2,500 cap, to ensure their property reaches at least an EPC rating of E.

The consultation is open until Tuesday 13th March.

The government intends to issue its response to the consultation in spring 2018 and make amending regulations during autumn 2018 that will take effect from 1st April 2019. Full details are available here.

From 1st April 2018, new Minimum Energy Efficiency Standards (MEES) will prohibit landlords from granting new tenancies for properties with an EPC rating of F or G. But to help overcome the changes, check out these top tips.

The NLA issued the following response: ‘The NLA will be responding to the consultation in due course. While the reduction in the cost cap to £2,500 from the previously floated £5,000 is a welcome move, the introduction of any cost cap is not a policy that the NLA can support.

‘The government states that they understand the “split incentive” inherent in the PRS, whereby the costs of improvements fall to landlords but tenants are the main beneficiaries. However, the imposition of a cost cap does little to solve this problem. It will further increase the financial burdens currently being heaped on to landlords and risks the costs being passed on to tenants or the removal of much needed affordable housing from the sector.

‘For example, these amendments would come into force at a time that mortgage interest relief restrictions are having an increased impact on landlords' finances. The NLA recently commissioned Capital Economics to look at the financial impacts of these tax changes, available here.

‘We are disappointed that the proposals outlined in the consultation do not include the reintroduction of the Landlords Energy Saving Allowance (LESA), which was scrapped in 2015. The NLA had called for its reintroduction in last month’s Budget as a means to incentivise and encourage energy efficiency improvements across the whole sector, not just at the bottom.

‘We have not been alone in this call: the Labour party including the policy in their 2017 manifesto and the Government’s own Committee of Fuel Poverty has recommended LESA’s reintroduction.’

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