The landlords’ trade body says the tax system needs reforming to support energy improvements in the private rental sector.
The intervention by the National Residential Landlords Association comes as Chancellor Rishi Sunak is putting the final touches to next week’s Budget amidst swirling speculation over the government’s flagship Green Homes Grant scheme.
Last week the all-party Environmental Audit Committee of MPs concluded the scheme had been “poor” while the eligibility criteria “prevented many from being able to access vouchers for the measures they required.” Over last weekend The Times suggested the government would shortly scrap the scheme completely.
Given that over 32 per cent of properties in the private rented sector were built before 1919, the private rental world faces a huge challenge in making homes energy efficient when compared with any other housing sector.
The government has committed to upgrade as many private rented sector homes as possible to Energy Performance Certificate Band C or better by 2030. Currently, 62 per cent have an EPC rating of D or lower.
Now the NRLA is calling on the Chancellor to help achieve this by ensuring tax actively supports landlords who want to make energy improvements.
Ministers have proposed to increase the amount up to which landlords have to pay to make a property more energy efficient from £3,500 to £10,000.
According to government data, the average gross rental income for landlords is £15,000 per year before tax and other deductions, and the NRLA insists the impact of this change is likely to decimate the income of some landlords.
The association is proposing that energy efficiency measures carried out by a landlord should be offset against tax at purchase, as repair and maintenance, rather than as an improvement at sale against Capital Gains Tax.
This would address anomalies – for example, whilst replacing a broken boiler is tax deductible, replacing an energy inefficient model for a more efficient boiler or heating system is not.
Ben Beadle, NRLA chief executive, says: “The rental market stands ready to play its part in securing a green recovery. However, to achieve this we need a tax system that properly supports and encourages the work needed to ensure rented homes as are energy efficient as possible on a long-term basis.
“The Green Homes Grant scheme proves that short term measures do not work.
“The Chancellor needs to use tax more positively to encourage investment in energy improvements. This would play a crucial role in cutting bills for renters, reducing carbon emissions and improving the nation’s housing stock.”