Draft Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2016

Andrea Leadsom Excerpts

Wednesday 8th June 2016 General Committees

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

I beg to move,

That the Committee has considered the draft Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2016.

These regulations make a minor amendment to the Energy Efficiency (Private Rented Property) Regulations 2015. They will postpone the date by which the Secretary of State must establish the private rented sector minimum standards exemptions register. For hon. Members who are unfamiliar with the private rented sector minimum standards, I will quickly give some background on the sector and the 2015 regulations before discussing the specific effect of this amendment.

There are about 1.2 million non-domestic rental properties in England and Wales, which make up approximately two thirds of the non-domestic property market. About one in five of those properties fall within the lowest two energy efficiency bands—F and G. In the domestic rental sector, there are about 4.6 million properties in England and Wales, making it the second largest tenure after owner occupation, at around one fifth of the total domestic housing stock. Up to 10% of those properties have an F or G energy performance certificate rating.

The 2015 regulations will drive improvements in the least energy efficient privately rented properties across the domestic and non-domestic sectors. They will do so by requiring landlords of F and G-rated properties to improve their properties to a minimum energy efficiency rating of E if they wish to re-let them after 1 April 2018. By targeting the worst-performing properties, the minimum standards regulations will improve the living and working conditions of tenants, many of whom are among the most vulnerable, particularly in the domestic sector. By reducing winter peak demand, the regulations—particularly the non-domestic provisions—will also help improve the UK’s energy security.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

The Minister used the word “vulnerable”. I chair the all-party carbon monoxide group, which deals with energy in this kind of property, and we have been campaigning to have carbon monoxide detectors in this sort of property for a very long time. We wanted it in the green deal, and at one stage we thought we had nearly got there under the previous Government. The backdrop to this is the introduction of smart meters. I wonder whether these regulations are co-ordinated with those two problems.

--- Later in debate ---

[Andrea Leadsom]

I am grateful to the hon. Gentleman for raising those issues; I recall that he raised them some time ago, so I recognise that he has a strong interest in them. They are not relevant to these regulations, but I will certainly take them away and look at them again. I suspect that it is not for my Department, but I will certainly get back to him.

The regulations recognise that there will be instances when it will not be cost-effective or technically feasible to improve particular properties, so a number of temporary exemptions are provided to protect landlords. For example, landlords will not be required to improve a property to an E rating where planning consent is required and cannot be obtained. Landlords will also be exempt where there is independent evidence that installation of a recommended measure would damage the fabric of their property or reduce its value by more than 5%. In the non-domestic sector, landlords will be required to install only measures that cost the same as or less than their expected energy savings over a seven-year period, and they will be eligible for an exemption if the improvements do not meet that payback test. Similar cost-effectiveness tests exist for the domestic sector, which I will discuss further in a moment.

In all cases where an exemption applies, the regulations will require the landlord to register that exemption on a centrally held register, known as the PRS exemptions register, which my Department is required to establish for this purpose. Currently, the regulations give 1 October 2016 as the date on which this register must open. That is a full 18 months before the minimum standards come into force.

We are now seeking to amend that date for two reasons. First, the establishment of the register, although not a significant technical undertaking, requires time to finalise the design, and to build and user-test the prototype with landlord groups, local authorities and local weights and measures authorities that will enforce the minimum standards. Given that a majority of landlords are unlikely to seek to register an exemption until just before the minimum standards come into force, we believe that postponing the launch of the register by six months—until 1 April 2017—will provide us with reasonable extra time to build and fully user-test the database, without negatively affecting landlords’ plans to register a valid exemption.

Secondly, we also want to postpone domestic landlords’ access to the register for a further six months, until October 2017. I noted a moment ago that the minimum standards regulations contain a cost-effectiveness test for domestic landlords. That provides a five-year exemption for landlords where they are unable to undertake improvements without up-front cost—specifically where measures cannot be wholly financed, at no cost to the landlord, using funding from central Government, a local authority or any other source.

Hon. Members will be aware that since mid-2015 the Green Deal Finance Company has not been funding any new green deal plans. Although obligated energy company funding will continue to be available after 2018, and local authority grants may continue to be available in specific areas, the current absence of green deal finance leaves a gap in the operation of the regulations as currently structured. We are clear that that should not be allowed to affect the delivery of the minimum standards adversely, and we are working with the sector now to determine what amendments we need to make to the regulations to allow the domestic standards to work.

Inevitably that work will take time, both to agree policy and to consult effectively on any proposed amendments. In the meantime, it would not be sensible to allow landlords to register five-year exemptions on the basis of a lack of green deal finance, which would risk significantly reducing the impact of the PRS regulations over that period. By postponing domestic landlord access to the register until October 2017, we are ensuring that we can consult fully and make any necessary amendments before landlords can begin to register exemptions.

In parallel, we will use this period to work with landlords’ representatives and others to ensure that landlords are fully aware of the circumstances in which an exemption can apply. Just as importantly, we will also be working closely with tenant representative organisations to ensure that tenants understand their rights under this legislation and the circumstances in which their landlord can and cannot register an exemption from the regulations.

[Mr Sheerman]

I know that the hon. Lady came back to me and said that it was not in her Department’s remit, but surely her Department does cover the environment. We are talking about smart metering. The Government have introduced a programme of smart metering up and down the country. I would have thought that without smart metering one cannot judge how effective any of these regulations will be. The programme is going to be in every household in the country. It seems essential that these regulations take note of what is going on, even if it is within another Department. Surely the people we represent should also be protected, having the right not only to a decent environment, but to a safe environment with carbon monoxide detectors.

[Andrea Leadsom]

I am sorry, but I have to point out to the hon. Gentleman that this is about a register of exemptions for improving the energy efficiency of buildings; it does not deal with the matters that he is raising.

In conclusion, these amendments seek to postpone the launch of the private rented sector exemptions register by six months, until April 2017, with an additional postponement for domestic landlords until October 2017. The amendments are being made for both technical and policy reasons. Although they are minor in themselves, they will help ensure that the minimum standard operates effectively in line with its original intention to deliver significant improvements to the energy efficiency of the least efficient properties in the private rented sector.

--- Later in debate ---

[Andrea Leadsom]

I am grateful to the hon. Gentleman, because I agree with a lot of what he says, particularly the vital importance of sorting out the lack of efficiency in the homes of some of the most vulnerable people, and some businesses that really struggle. It is, of course, also important in meeting our climate change goals that we address those issues.

I do not agree with the hon. Gentleman that we should force them to do it. As he points out, the 90%-plus of landlords who are good people trying to offer a good service and do the right thing will already do it. These regulations seek to address the fact that a minority does not want to do it to look after tenants and the most vulnerable. We are seeking to ensure that the regulations tackle those people. By giving a suitable amount of time, suitable notice, we can ensure that those non-domestic and domestic properties are improved.

[Barry Gardiner]

I do not wish to make this too much of an iterative process. Today we are looking at the exemptions. The hon. Lady and I agree that the vast majority of landlords will do the right thing. They want to do the right thing and provide a good service. We are looking at the exemptions that precisely that 11%—or 440,000 properties-worth of landlords—will seek to take advantage of. I do not see why we should not use wider powers. If we say, “Look, you cannot even rent your property if you do not get it up to standard,” why are we countenancing not using something such as an equity release scheme that says, “You need to be able to go down that track. There is value in the property.”? That can then be pursued.

[Andrea Leadsom]

Again, we are both on the same side. The whole point about delaying the effective start date of the exemptions register is precisely to look at the issues that the hon. Gentleman raises. We can argue about the green deal; that was before my time and he has made his points.

What we are dealing with today is the position where, if we introduce the exemptions register right now, landlords will be able to say that there are no means by which they can avoid spending money. Unless we delay the exemptions register from taking effect, we are creating an opportunity for landlords to take advantage of a policy interregnum. We are saying that we need to delay it so that we can consult landlords and tenants associations to get the right balance, so as to ensure that lots of people do not end up homeless because their landlord cannot or will not sort out the home, while at the same time we make it as difficult as possible for anybody to avoid bringing the quality and standard up to the right level.

I will make one final point. Since April 2010, Government policies have supported the insulation of 3.8 million lofts and 2.1 million cavity walls. We are absolutely clear that more than 1.2 million households have achieved lower bills due to energy efficiency improvements over the past five years. I do not accept that we have not done a good job. We are absolutely committed to energy efficiency and to resolving some of the terrible issues of fuel poverty.

The 2015 energy efficiency regulations are an important step towards providing domestic and business tenants with more comfortable properties and lower energy costs. Building on the new timeframe established by these amendments, we will work with our stakeholders to deliver the exemptions register and, by so doing, support landlords so that they can meet their obligations efficiently, and support enforcement authorities in their duty to ensure that that happens.

Question put and agreed to.