You’re probably already aware that the government has committed to making the UK net-zero by 2050. You may not, however, have realised that this could have significant implications for the whole housing market. Here are some key points on energy efficiency you need to know.
Landlords need to meet energy efficiency standards
Domestic rented properties are already required to meet Minimum Energy Efficiency Standards (MEES). At present, this is an E across the whole mainland UK. In Scotland, however, from 1st April all new tenancies must be for properties with a minimum band of D. It may be possible to register an exemption although these are subject to review after five years.
The implementation of MEES creates two points worth noting. Firstly, they have direct cost implications for landlords. If landlords have existing portfolios, then they will need to ensure that they meet the MEES.
If they want to expand their portfolios then they will either need to ensure that they buy property that already meets the MEES or be prepared to upgrade it. This means that landlords and residential buyers may increasingly find themselves in direct competition for energy-efficient property or at least property that can be made energy-efficient.
Secondly, the MEES apply to all domestic rented properties, including ones owned (directly or indirectly) by local authorities. This means that local authorities will also need to find, or be given, the money to upgrade substandard properties. Either way, the funding will, ultimately, come from taxpayers and that includes landlords.
Mortgage lenders also need to consider energy efficiency
By 2030, mortgage lenders will be required to ensure that the properties in their lendings portfolios have an average rating of Band C. This means that landlords with mortgages could be faced with a choice of upgrading them beyond the legal MEES for domestic rental properties or paying higher mortgage costs.
In fact, potentially, they may not even be able to get mortgages. If a lender already has a substantial number of lower-band properties on its books, it may not be willing to take on any more. This means that these regulations have the potential to create a new generation of “mortgage prisoners”.
It may be possible to assist people who have properties that can be upgraded to a C or better. There would be a question about how that assistance would be given (i.e. who would ultimately pay for it). That would, however, be a separate issue.
It does, however, still leave the question of what happens with properties that just can’t be upgraded enough to make a C grade. These properties could end up becoming targets for people who can afford to pay cash. Even these people would, however, find themselves potentially limited to selling to other cash buyers.
They really do make a difference to your energy bills
There are two compelling reasons for maximising the energy efficiency of any home. The first is the environment and the second is energy bills. Likewise, there are two compelling reasons for switching from gas to electricity. Again, the first is the environment. The second is security. Gas comes from one specific source. Electricity can be made from several sources, including renewables.
Historically, pricing has favoured gas. Last winter, however, saw gas prices soar and widespread uncertainty over the supply. That in itself may not be enough to tilt the financial balance in favour of gas. Even if it isn’t, however, the government may choose to intervene and use tax structures to push the adoption of electricity over gas.
Whatever way you look at the situation, it’s clear that domestic energy efficiency is going to be a major issue for everyone over the coming years. This means that homeowners and landlords alike might want to look seriously at what improvements they can make to their properties.
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