Redstones - The Green Deal

The Green Deal – How Will It Affect Landlords?

In 2011, the government introduced its Energy Act which included the ‘Green Deal’.  In essence, this new Act aims to reduce carbon emissions in properties therefore improving their energy efficiency and making them warmer.

The Green Deal itself offers a new way to pay for energy efficient property improvements. Green Deal Finance is available to pay for cavity insulation, double glazing and so on, with costs being repaid through the savings made on electricity bills.  Once the loan is paid in full, the people living in the property will enjoy the full savings benefits. For landlords, this means that the costs are met by tenants.

How does this affect landlords?

From 2018 it will be illegal for a landlord to rent out a property with a poor energy rating and all private rental properties must carry a minimum E rating on Energy Performance Certificates.  It is estimated that this may affect around 10% of privately rented homes, making them impossible to let within 4 years’ time unless action is taken.

Some changes will take effect in 2016 with tenants legally able to demand improvements to energy efficiency from their landlords.  Fines may be imposed for those landlords who fail to meet any requests which are deemed ‘reasonable’.

There are two contrasting views regarding the effect of the Green Deal on landlords.

Positive

As far as landlords are concerned, the advantages offered by the Green Deal mean that:-

  • Older properties will benefit from improved energy efficiency.
  • Costs will be met through electricity bills, ie, paid by the tenant.

Concerns

The Residential Landlords’ Association has raised a number of concerns however, namely:-

  • The potential risk that properties may be harder to rent due to the charges on the Green Deal for any properties requiring improvement. The perceived risk is that tenants may resist payment of charges.
  • The Energy Act will result in discrimination against the private rented sector which already has a higher energy efficiency rating than the owner/occupier sector.
  • The cost of the work required may have been under-estimated as the private rental sector contains a significant proportion of houses built before the First World War and a higher number of tenants living in ‘fuel poverty’.
  • The calculation of costs versus savings of the Green Deal itself do not take into account the financial circumstances of a tenant.  Costs savings may therefore be less than anticipated, casting a negative light on the Green Deal.  The anticipated interest rates on the Green Deal may also deter tenants from embracing the scheme.
  • The RLA believes this will particularly affect those tenants living in fuel poverty and has recommended that tax allowances for landlords should be increased, or landlords are allowed to pay the Green Deal charges in order for their property to achieve Band E.

The overall effect on the private rental market is yet to be understood but it is vital that all landlords are aware of the impact that this may have on their property portfolio. More information on the Green Deal can be found on the government’s official website.

Landlords with a property portfolio who may be affected by these changes should contact their lettings agent who can advise them on the best course of action.

For prospective landlords or for those thinking of expanding their current portfolio, in addition to carrying out their standard research before purchasing a property they must also consider the age of the property and ensure they meet the new requirements ahead of 2018.

Thinking of letting your property? Contact Redstones today to discuss the range of services we offer from introduction only to full management.