Green Homes Grant Axed… What Now for Landlord Energy Efficiency?
Published on April 30, 2021 by Sarah Mac
With the government’s Green Homes Grant axed just six months after it was launched, the question is, how will landlords meet the energy efficiency requirements that have been imposed upon them?
The Green Homes Grant was introduced in September 2020 to help landlords and homeowners upgrade their properties to make them more eco-friendly. But it closed early on 1 April to new applications. Vouchers of up to £10,000 were offered to cover the costs of making energy efficiency improvements to residential properties ahead of the new energy efficiency measures currently under consultation that may see a law introduced forcing all properties to meet an Energy Performance Certificate rating of C or above from April 2025.
The scheme though was plagued with issues, such as the complicated approvals process. An investigation by LandlordZONE revealed a host of teething problems, as the scheme fought to attract enough approved tradespeople, with many willing to go through the required Trustmark process. COVID restrictions also posed problems, as did confusion over which energy efficiency improvements qualified and in which order they had to be worked on.
The official website also faced technical issues and, by 1st December, less than 6,000 applications from landlords for Green Homes Grant vouchers had been made.
Of course, this leaves the question of unspent, allocated government funds.
How will landlords meet EPC requirements now?
The BBC has said that £300m of the unspent funds will now be redirected to a parallel ‘green upgrade’ programme, the ‘Green Homes Grant Local Authority Delivery Scheme’. This is set to target low-income households, and will be managed by local councils.
But it won’t necessarily provide a direct source of help to landlords, who are facing pressure from the government’s target of net zero greenhouse gases by 2050, a scheme which requires an EPC of C or above for all new private rented sector tenancies by 2025, with the rest to follow by 2028. Something of an ambitious ask, bearing in mind that over two thirds of private rented properties in England and Wales are band D or lower.
The National Residential Landlords Association (NRLA) has been campaigning for more funding to help landlords boost their energy efficiency measures beyond the minimum level. But it remains to be seen whether what will come of their efforts.
Are ‘green mortgages’ the answer to help landlords meet upcoming energy efficiency benchmarks?
Something that has come into the playing field and that may potentially offer landlords a lifeline in terms of meeting energy efficiency requirements is the ‘green mortgage’.
Green mortgages reward landlords for making their properties more energy efficient, so says mortgage broker Mortgages for Business. In comparison, only ten per cent of landlords who purchased their first buy to let property in the noughties said they had been interested in green mortgages at the time. This could well have something to do with the recent pressure to upgrade to the higher EPC band.
Amongst the specialist loans, some come with the requirement that funds must be used in full to cover the cost of sustainable home improvements, such as installing solar panels, replacing windows, upgrading boilers, fitting air source heat pumps or adding electric car charging points.
There is also a Green Further Advance product, offered by Paragon, designed to assist landlords in making upgrades to properties with EPC ratings of D or lower. But landlords must have been previously accepted for a Green Homes Grant in order to apply.
Jeni Browne, director of Mortgages for Business, says that the best green mortgage products will offer a rate discount, rather than benefits such as reduced fees or cashback.
‘A green mortgage means that, once they can confirm they have a revised energy rating for their property, the right lender will recalculate their mortgage rate at a discount,’ she says.
Browne also says that landlords should ensure the discount is applied for the entire duration of the mortgage rather than just for the fixed period.
‘There are various mortgage products out there but the best are applied on completion of an energy efficiency project and applied for the lifetime of a mortgage,’ she adds.
3.2 million property EPC shortfall… a green funding gap for buy to let lenders?
It is reckoned that 3.2 million private rented properties do not meet the soon to be required EPC C rating, and that to get them there could set landlords back anything up to £10,000 per property.
This, combined with the ditching of the Green Homes Grant, means there is an ideal opportunity for buy to let lenders to fill the funding gap for energy efficiency improvements courtesy of further advance deals.
Let’s see how the market develops over the next few months.