With few carrots and tepid tambourines what is there left to stimulate we donkeys into changing our behaviour?

A market shift is underway in the rental homes sector since UK government legislation mandated that all such properties must have an energy performance certificate (EPC) rating of at least C from 2025. Andrew Warren, chairman of the British Energy Efficiency Federation discusses how to shift behaviour in an article in the March issue of Energy in Buildings & Industry.

The Power of the stick to change behaviour

Effective energy saving programmes need three mutually supportive facets to succeed. As does getting donkeys moving.

In the case of donkeys, the initiatives required can be described simply as:

• Carrots, to encourage greater action.

• Sticks, to enforce greater action, and

• Tambourines, noises to alert the donkey into taking action.

At the start of the century , UK energy policy makers seemed to understand this symbiosis . Grants programmes were combined with tighter minimum energy consumption standards. Together with public information drives, these led to regular year on year drops in overall consumption of fuel. Between 2005 and 2015, final consumption of all types of fuel had dropped by 16.2% , from 159,676 kilotonnes of oil equivalent{ktoe}  to 137,430ktoe.The biggest sectoral drop was in natural gas , down 32.8% within ten years..

Subsequently, grants programmes have almost vanished witness the subsequent 90% drop in household insulation measures . Multi-billion long term programmes like Green Homes Grants come and go after a few months. Government surreptitiously scraps its much-heralded Energy Efficiency Deployment Office. It blocks the Zero Carbon Homes timetable. It stops appointing Ministers with special responsibility for energy efficiency. So silent is the Government now about the desirability of energy saving that it is seldom even whispered as a potentially valuable response to forthcoming price hikes.

So, few carrots. Tepid tambourines. What is there left to stimulate we donkeys into action?

Do not despair. There seems a growing appreciation of the value of sticks to ensure greater energy efficiency. Much is made of the enormously powerful effect that tightening minimum energy consumption standards has achieved in the products sector. From commercial refrigerators via washing machines to industrial pumps and lighting outlets, all are now way more energy efficient than in 2000.

It was in these sectors that the concept of producing consumer-friendly labelling from A (great) to G(dreadful) first evolved- and is still improving. Back in 2005, the first Energy Performance Certificates (EPCs) were issued.  Initially dismissed as uninteresting bureaucratic bumf, these simple categories have gradually moved into common parlance. Estate agents now automatically provide the rating details in every advertisement. Solicitors now require details to be available before conveyancing processes can progress. Academic surveys now conclude that improving a home’s energy grade increases its’ sales value – not often by a large percentage, but sufficiently to reward vendors who spend money on prior upgrading.

Tenants not told about EPCs

Initially, everybody rather forgot that EPCs were relevant to the rental sector as well. Freedom of Information surveys disclosed that only a minority of tenants ever were told about any EPC rating before moving in, frequently because the landlord hadn’t bothered to acquire an EPC ,or because the result was so bad they didn’t want to draw attention to it.

No longer. Many – sadly not yet all- local authorities do check up on recently let properties, and take action against recalcitrants. Such actions were stimulated by initiatives taken under the May government,  outlawing the letting of F and G rated properties.

The present government is determined to go further. It proposes to ensure that by 2025 all new rental agreements must be for properties that have an EPC rating of at least a C. This commitment is already shaping investor buying behaviour. Additionally, all existing lets are due to be improved to a C standard by 2028. Threats of fines of up to £20,000 for missed deadlines are being mooted, well over double current fine sizes for transgressors..

While the proposals remain at the consultation stage, many landlords are already hedging their bets, and scrambling to buy energy efficient properties to let out. So far this year, the share of homes bought by investors with an EPC rating of A-C is running at 50%, the highest figure on record. That is upfrom 39% in 2021 and 33% in 2020. In London, the proportion is now 66%.

This uplift has been driven by two factors.  Firstly, landlords have bought more energy-efficient homes where improvement works have already been done.  Secondly, there has been a shift towards buy-to-let investors purchasing newer homes, particularly flats, built within the last decade. Aneisha Beveridge, of estate agents Hamptons, said: “Given it will prove impossible for all homes to secure an EPC rating of at least a C without significant cost, it’s likely to mean older homes will become considerably less attractive to landlords.”

Investors keen to get ahead of the incoming rules have been buoyed by a growing number of banks and building societies offering lower mortgage rates to landlords buying more energy efficient properties. Eight more lenders are offering these green mortgages to landlords since August last year, according to Angus Stewart of Property Master, a buy-to-let broker. He said: “Lenders are now willing to offer landlords preferential mortgage rates if they are buying a property with a higher EPC rating, so we are seeing an increase in investors doing just that.  These landlords are saving on their finance costs and avoiding having to do work on properties they are buying now, to make sure they meet these requirements when the regulations change in 2025.”

Carrots and tambourines may be in short supply right now.  Moving to band E only affected around 200,000 of the least efficient buy-to-let properties . But moving to band C must improve well over two million properties. Sticks work. The Government must stick with them.