Commercial Insurance Articles
The Green Deal - landlord friend or foe?
08 Jun 2011
Energy efficiency. Sustainability. Eco-friendly. Green credentials.
Twenty years ago, these phrases were either seldom heard or considered buzz words that lacked substance. Now, however, it is impossible to avoid the huge implications that come along with them.
As well as the argument of environmental protection, the recession and the stammering recovery that the UK is progressing through has highlighted the cost of waste in terms of something which is often more tangible hard cash.
With this in mind, the coalition government put forward a set of proposals as part of the Department for Energy and Climate Change's Energy Bill.
Called the Green Deal, it has been hailed as a way for everyone to benefit from the government's commitment to improving efficiency in everything from schools to offices to multi-storey blocks and single residences.
Energy and climate change secretary Chris Huhne commented when launching the plans: "As consumers, we pay a high price for inefficient housing and so does the planet. Under the Green Deal, bill payers will be able to get energy efficiency improvements without having to front up the cash."
Under the Green Deal, accredited providers will be established, which will not only manage a system of home improvement loans, but also co-ordinate a network of Green Deal specialists, who will cover everything from recommending energy-saving measures to installing features in properties.
These proposals have further significant implications for landlords, who will be required to carry out "reasonable" requests from tenants to improve the sustainability of their rented properties.
Earlier this month, as the bill reached its second reading in the House of Commons, Mr Huhne confirmed that this element of the Green Deal will be implemented by 2016, meaning that buy to let owners will be legally responsible for ensuring a basic level of energy efficiency in their homes.
While no-one could deny the benefits of a properly insulated housing, coupled with up-to-date boilers and low-energy lighting, many organisations have reported anecdotal trepidation from landlords over how the proposals will work and what the bottom-line finance will mean.
In principle, landlords (and owner-occupiers alike) will not have to pay out upfront costs for installing energy-efficiency measures in their houses or commercial properties.
Instead, Green Deal providers will offer a finance-based loan for the work, which will then be repaid through savings achieved from lower energy and lighting bills.
However, research from environmental think tank E3G has suggested that there is "significant doubt" over whether the proposals will meet their intended aims.
According to the organisation's Financing the Green Deal report, proposed high interest rates for the Green Deal loans may mean that homeowners and landlords alike reject the drive for retrofitting the UK's housing stock.
However, John Alker, director of policy and communications at the UK Green Building Council (UK-GBC), said that there should be "no losers" in connection with the proposals.
"The landlord will obviously have to initiate the Green Deal, but it will reduce the electricity bill for tenants in the long run and should make the property better," he explained.
Mr Alker did acknowledge that incentivising energy efficiency is not as straight forward as in other home improvement or safety matters, such as fire regulations or construction standards.
"It does have to be a combination of carrots and sticks," he admitted. "I think different messages work for different people. Whether it's about reduced energy bills, having a higher quality and more valuable home or the environment, there needs to be a range of different drivers and incentives to do this."
The inclusion of a date by which landlords will become liable for homes which do not meet a basic level of sustainability is also a plus for landlord insurance policyholders, although the deadline may at first seem daunting, Mr Alker claimed.
"It actually provides a bit of additional certainty for landlords, because they know they have to do this, they have five or six years to do it, [and] they can plan ahead and start getting their house in order," he argued.
This is something which was backed up by Adrian Penfold, head of planning and corporate responsibility at British Land, who told an audience at May's Sustainability Now event that the roles and responsibilities for landlord and occupier must have more "clarity", while the wider energy efficiency market must also display "transparency that is helpful in terms of occupier perceptions and landlord initiatives".
While it may be being viewed with some suspicion at first, the Green Deal is undoubtedly aimed at establishing a better quality of home as the basic necessity for the public.
As such, Andrew Eagles, managing director at Sustainable Homes, believes that the scheme will take off when the consumers begin to demand energy-efficient measures as standard.
"Regulation creates the platform, so that is a good base [for improvements]," Mr Eagles explained.
"But the real change is going to happen when house buyers and renters start saying, 'Actually, I'll be looking at a fuel bill of potentially 2,000 by 2020. I want an A-rated home to rent or I want a code level 5 home to live in.'"
He added: "The real revolution will come when we are facing demand from people who are buying or renting, for more energy-efficient homes."
How should this be achieved? Gordon Miller, sustainability and communications director of Sustain Worldwide, backs a "well thought-out marketing campaign" which will highlight the benefits of the Green Deal.
In terms of landlords, the clear plusses to the proposals are the opportunities to significantly improve the desirability of their property when it comes to considering the prospect of resale without capital expenditure and, of course, happy tenants.
While there are still a range of issue to be fleshed out regarding the implementation of the Green Deal, there is no doubt that this presents a unique opportunity for landlords and tenants alike to really address the issue of energy efficiency in the home. Of course, technology is not the only way to reduce bills, with the need for energy-saving behaviours to be promoted alongside the new measures. A turned off lightbulb will always use less electricity than a low-energy one!
