Today we sat down with Cerys Williams (pictured), finance partnerships manager at Sero, to talk about buy-to-let, energy efficiency and retrofitting.
The Buy To Let Market Forum kicks off on 19 April in Bolton with events also taking place in Worcester, Cardiff and West Sussex.
To register for the event and find out more follow this link.
Q: There has been some debate around whether landlords should retrofit their properties ahead of EPC legislation coming into force. Why should landlords retrofit their properties?
A: Despite increased Minimum Energy Efficiency Standards (MEES) not being legislated yet, we know it’s coming. It’s not a question of if, but when. For landlords to allow themselves enough time to plan and budget for works, it makes sense to set the ball rolling at the earliest opportunity.
Leaving the planning of energy efficiency improvement works too late could impact the quality of implemented measures. Not only this, consumer appetite for more energy efficient homes is rising. Failing to keep pace with renter expectations could impact both the rental value as well as the property’s appeal. A recent study by Legal and General and YouGov found that renters are willing to pay a 13 per cent premium for a low carbon property.
Q: What are the main barriers for landlords retrofitting?
A: A lack of clear legislative guidance is certainly an issue, as are the associated costs of undertaking the retrofit works themselves. It can be a difficult decision for landlords to invest capital not knowing what the return on investment might be. Though the evidence to support increased rents for more energy efficient homes is mounting, we’re still in the early stages of recognising a green premium.
Another barrier facing landlords is understanding which retrofit measures should be undertaken and in which order. Each home is unique, so a one size fits all approach will not work here. The landlords need to understand the current energy efficiency of their homes before undertaking any retrofit works to avoid unintended consequences such as insulation inadvertently restricting ventilation leading to mould growth.
Q: How effective is retrofitting?
A: Retrospectively improving a property’s energy efficiency rather than installing low carbon technologies at the point of construction certainly has its disadvantages. An early 1900s home will have been built to very different standards to those we see today, plus we must factor in its general deterioration over time. However, retrofitting is still hugely beneficial to all house types, it’s just the approach that differs.
At Sero we align ourselves to the PAS2035, a specification for “whole home” retrofit approach. However, we break it down into bitesized steps so that a property can gradually improve rather than having to undertake all of the works (and cost) at the same time. By assessing the whole home and then sequencing the retrofit improvements, you can batch specific measures to maximise the impact as well as streamlining costs. Through this method, I’ve seen EPC D homes plotted to reach net zero carbon by the mid-2030s, with legislative benchmarks such as EPC C by 2025 woven into the Pathway.
Q: What incentives would help address these barriers?
A: Though I see incentives as an important element of accelerating the adoption of energy efficiency improvements and low carbon technologies within the private rental sector, I don’t believe the public purse should be responsible for funding retrofits.
It’s simply not sustainable given the 29 million UK homes that need to achieve net zero carbon by 2050. However, early adopters should be applauded for dedicating themselves to improving the energy efficiency of their properties and this should include landlords.
That being said, tax exemptions such as no VAT on energy efficiency improvement measures would see a significant saving on capital cost.
However, I see the biggest incentive for landlords being the increased revenue their properties could yield once their energy efficiency is increased. Conversely, understanding the impact of not undertaking these measures might be enough to inspire them to take action.
