Groundwork research into energy efficiency activity in the private rented sector

Our Ipsos/MORI survey found that people living in private rented accommodation have much lower rates of energy efficiency measures than that of homeowners, social housing or council tenants.  For example 88% of homeowners have some loft insulation but only 42% of private tenants.

Groundwork commissioned the market research consultancy Databuild to conduct research into the barriers to household energy efficiency activity in the private rented sector. Databuild conducted focus groups with landlords, agents and tenants, qualitative interviews and a quantitative survey of private sector tenants.

Barriers

  • Cost

For landlords, barriers included the cost of taking action such as the time to investigate measures, hiring installers / suppliers, as well as the indirect costs of disruption to their properties and the subsequent loss of revenue whilst properties are made suitable for habitation.

In addition, landlords and agents felt that ‘green’ alternatives to ordinary products were more expensive e.g. one agent pointed out that A-rated boilers were far more expensive than regular boilers.

  • Return on investment

Many tenants stay in properties for less than a year. This means that there is little motivation to invest in property improvements or energy efficiency measures with lengthy payback periods; the tenant is unlikely to be around long enough to realise sufficient savings.

In most cases, tenants pay for the bills in rented properties. Because of this, the potential for return on investment was not obvious to landlords.

  • Knowledge

Both landlords and tenants felt they lacked knowledge on how to get energy efficiency measures installed, how much they might cost and what the impacts / benefits would be.

  • Interest

Landlords and agents argued that tenants tend not to be interested in green / energy efficiency activity and that installing these measures will not attract tenants.

This reveals an impasse between tenants and landlords. Most tenants do not express an interest in energy efficiency and do not prioritise it. Landlords do not see energy efficiency as being important to potential customers and therefore do not see value in investing in it.

Encouraging activity

The LESA (Landlord Energy Saving Allowance) provides all private landlords who pay income tax and let residential property with upfront relief on capital expenditure for installations of loft insulation, cavity wall insulation, solid wall insulation, draught proofing and insulation for hot water systems.

The scheme has been in operation since 2004 but a large proportion of landlords do not seem to be aware of it and research has found that not many authorities are actively promoting it.

The boiler scrappage scheme provides money for inefficient boilers where they are replaced with A-rated boilers. Yet the scheme does not include broken boilers, which is often the point at which landlords want to replace them.

Conclusions

  • The capability and potential to take energy efficiency action lies principally with landlords. Agents do not see it as their remit to promote energy efficiency, whilst tenants lack permission, capital, opportunity for returns on investment, and often enthusiasm to take action in this area.
  • Landlords operate to make a profit; activities must therefore carry obvious financial benefits. Whilst the cost of action can be quite high, landlords are willing to invest in property improvement where it attracts business.
  • However, the general consensus amongst landlords covered in the research is that tenants are not interested in energy efficiency and therefore it is not worth investing in. This belief was borne out by tenants themselves.

There are three areas for action:

  • A lack of incentive for landlords to act, and therefore a need to create incentives.
  • A lack of knowledge / information on how to act, and therefore a need to target and promote information that will enable action.
  • A lack of tenant demand, and therefore a need to raise awareness of the benefits to tenants of taking action.

For further information contact Sarah Parkin, policy manager, Groundwork UK.