Dan Ward

The Wales Future Generations Commission and New Economics Foundation have just released a welcome report on decarbonising Welsh housing. The UK needs to retrofit energy efficiency measures in a house every minute between now and 2050 to meet 2050 emissions target reductions . This need to retrofit is particularly related to reducing energy needed for heating which makes up about 60% of a households energy use. This is a massive challenge which will require large amounts of investment. It is however imperative that the improvement of UK housing stock takes place.

Fuel poverty in Wales stands at 23% of households in Wales. UK housing stock is some of the oldest in Europe with 15 million (or approximately 56%) households built pre 1960 and 5 million of those pre 1920. Improvement of the housing stock would have a host of knock-on benefits, from health and well-being, to economic stimulus and reduced carbon emissions. But how do we do this? Who will pay for it? The report identifies a need for £15 billion spend on retrofit in Wales alone by 2030.

I have a suggestion which I think could provide an elegant solution to part of this problem. Most specifically in privately rented accommodation where standards are lowest and the need greatest. I focus on private accommodation as social housing already has the tools and drivers to encourage housing associations and councils to improve their properties. For private rented accommodation there is little to push landlords to improve their properties except for the minimum standard of an E in energy efficiency, and current government standard of changing the minimum standard to a C by 2028. Private tenants have the least power to improve the efficiency of their homes and private landlords are making profits on high rents for poor quality properties, at great cost to the tax payer through housing benefit and other indirect costs, such as the costs of poor health on the NHS. Private sector rents make up 14% (and increasing) of Welsh housing.

My proposed solution is this. All rental accommodation already has an energy efficiency rating from A-F. Why not bring in rent caps based upon the energy efficiency and overall quality rating of the home? You could include other metrics such as the amount of natural light, access to green space, storage space, room size/space per occupant, ventilation and put these together into an overall score of quality (again could be A-F), continuing the drive for higher housing standards. A good name for the initiative could be the ‘Healthy Homes Standard’. Let’s create homes that are fit for humans in the 21st Century.

Rent caps would be set against the median rent for the area (not the average as you don’t want a few very expensive properties to skew the figures) and around an initial energy efficiency rating of C. To continue charging the same rent on a D rated home, the landlord would have to invest in improving the property or suffer a reduction in rental income. If the landlord improves the property they can charge more rent up to the maximum for that energy efficiency/quality band.

I would suggest making the rent caps progressively more severe for homes of lower efficiency and quality.  For example a home with a C efficiency rating would have a maximum rental charge per person of say £300 per month, D would be capped £100 less at £200 per month, E would be a further £100 less at £100 and so on. This scale would change over time with the minimum standard for energy efficiency increasing over time (as they already do), corresponding to shifting rent caps. For example, by 2025 you wouldn’t be able to privately rent out a D band property any longer and a C band property would have a cap £200 lower than an A band property.  This is entirely reasonable when placed within the context of climate change, disproportionately high rent prices and a correspondingly high UK housing benefit bill of £27 billion and climbing.

The range of positive effects from these changes include;

• Tenants in low quality properties with landlords that choose not to improve the house will benefit from a significant reduction in rent charges, enabling them to afford their energy bills until the landlord brings the property up to standard.
• Housing benefit bill lowered by cheaper rents for poorer accommodation.
• Economic boost from reduced rent prices and reduced energy bills leading to increased spending in the local economy by tenants. The recent report identifies average savings of £418 per year per household (a conservative figure in my opinion). To put this in context that’s over £59 million extra spending power in circulation in Cardiff alone.
• Economic boon from housing efficiency improvements. Companies providing insulation, solar power, geothermal, battery storage, mechanical ventilation and heat exchangers would all get an increase in business leading to job creation. A bigger market should also lead to reductions in cost of energy efficiency installation due to competition and markets of scale. The Future Generations report estimates this could create 26,500 jobs and an extra £19.32 billion GDP by 2030.
• Health and well-being. benefits, including NHS savings, from warm and dry houses with people that have less precarious finances. A study in Northern Ireland gave NHS savings of 42p for every £1 spent on fuel efficiency, while the Future Generations report estimates £4.4 billion in NHS savings by 2040.
• Carbon emission reductions at a significant scale, not just in the reduction in demand and carbon emissions for the heating of homes but through reductions in electricity generation demand and consumption also.

All of this could be done at a low cost to government and would sync well with some of the options outlined in the Future Generations Commission report, such as interest free loans to speed up the work.  As multiple property owners landlords are some of the wealthiest people in the UK and for too long have been able to charge extortionate rents for low quality accommodation. This has also led to a boom in the buy to let market, further increasing property prices. Landlords who do not wish to invest and improve their properties for long term improvements can always sell their properties. If enough landlords do sell it may even bring down house prices. Note that this would only really affect those homes that had lower energy efficiency standards, so older houses or new houses that have not been built to a high standard. I think most would agree that these inferior properties deserve a lower price tag.

You wouldn’t even need to pay for enforcement. Simply put the money into an advertising campaign advising residents of the maximum amount they should be paying for a property of a given energy efficiency/quality rating, including making it a legal requirement for rental contracts to declare the relevant information.

These proposals may sound bold, ambitious and maybe you think, idealistic. But we have to decarbonise our housing stock, it’s not an option. Lets take this opportunity to improve our housing in all the other ways that contribute to our health and wellbeing. and meet current and future challenges of climate change, economic change and social change. In the form of the Well Being and Future Generations Act the Welsh Government is unique in having a legislative driver to think, plan and deliver in this bold, ambitious way. My challenge to the Welsh Assembly and UK government is this. Forget how things are now and think about how they could be better and commit to showing global leadership.

Note: This is an updated and altered article based upon an article which I originally authored for the IWA found here.