Minimum Energy Performance Standards in Shared Housing

Minimum  Energy Performance Standards in the private rented sector have just been passed into law. How will the final regulations affect shared housing (houses in multiple occupation) and  what could a future government do to improve their impact?

David Weatherall explores how minimum energy efficiency standard in the private rented sector will reach people living in shared housing (Housing in Multiple Occupation – HMOs). Based on the Future Climate study “Houses in Multiple Occupation: Energy Issues and Policy”

A few weeks ago, the government announced its response to the consultation on minimum energy performance standards (MEPS) in the private rented sector.

MEPS form part of the 2011 Energy Act and are an important step forward in UK energy policy. In the consultation on the detail of these regulations, several organisations raised the question of if and how the standards would apply in HMOs.

It’s good news that in moving from draft to final proposals for MEPS, the government has brought HMOs more clearly in scope.

In particular the government has now clarified that the minimum E energy performance standard (to take effect from 2018) will apply when someone moves into a room or bedsit in an HMO – as long as that HMO already an Energy Performance Certificate (EPC).

But, as in the rest of the private rented sector, HMO landlords will only have to comply with the minimum E standard when the required improvements can be undertaken at no upfront cost to them – either because they access a grant, or because the tenants are willing to pay for the improvements.

So, moving into an HMO will be a trigger for the minimum “E” standard. But, as we discuss below, more steps are needed to ensure that HMOs benefit equally from these regulations, and to make them more effective across the private rented sector. In summary:

• People moving into shared homes should have the right to see an Energy Performance Certificates (EPCs) for their property. We also need clarity on what type (domestic or non-domestic) of EPC different shared houses require, and clarity on how rules apply to HMOs that need non-domestic assessments.
• More broadly, government should be taking much more action to ensure that landlords comply with the requirements to produce an EPC whenever they rent out a property.
• Landlords should be required to make a limited contribution towards the cost of carrying out energy saving upgrades to meet the minimum standard. This is particularly important in HMOs that can be more expensive to upgrade.

What are the private rented sector energy efficiency regulations?

The government’s private rented sector minimum standards are as follows:

• From April 2016 tenants will have the right to request, and landlords will not be able to unreasonably refuse, energy efficiency upgrades that are cost-effective
• From April 2018 all private rented sector homes will have to meet a minimum Energy Performance Certificate “E” standard when they are put on the market
• From 2020 all private rented homes will have to meet the minimum EPC “E” standard

But there’s an important caveat. Landlords will only have to make energy efficiency upgrades where the measures can be fully funded from government grants or funding. Alternatively they will have to comply if the tenant is willing to pay for the improvement, including through the Green Deal pay as you save mechanism.

Another important point to note is that the minimum “E” rules only apply where a property has already been issued with an EPC. Every property has to have a current EPC whenever it’s put on the rental market, but there have been high levels of non-compliance with these regulations in the private rental sector.

Minimum Energy Efficiency Standards and HMOs

The government has now clarified that the minimum E energy performance standard (to take effect from 2018) will apply when someone moves into a room or bedsit in an HMO – as long as that HMO already an EPC.

The applicability of the rules to HMO room rental situations is very welcome, but an HMO might not have an Energy Performance Certificate for two reasons:

• The government does not require an EPC to be provided to an HMO tenant when they move into a room or a bedsit. An EPC is required to be issued – as with any other flat or house – when an HMO is sold or rented out as a whole property. But if an HMO has only been rented out on a room-by-room basis in the last ten years, it will not have a current EPC.
• HMOs, like all types of private rented home, may not have an EPC because the landlord didn’t get one when he/she was supposed to.

Enforcement in HMO situations

There are major issues around how local authorities will enforce compliance with the overall 2018 minimum standard regulations, given the cuts to many local authority housing and trading standards teams as a result of austerity. Unless every home that should, has an EPC, it’s hard to see how the overall regulations will have impact.

But the compliance problem seems even more stark in HMO room rental situations. With the rental of other types of flats, the property should be advertised with its EPC rating, making enforcement of minimum standards easier. But HMOs do not need to be advertised with an EPC rating and it will require an additional investigation by the council before any compliance action is taken.

Finally, some HMOs may require non-domestic EPCs (as they are regarded as non-domestic properties, like hotels). It is not clear how enforcement will happen in this situation. The government has not issued any guidance on what type of EPCs different types of shared housing requires.

Cost-effective upgrades

HMOs – as we showed in our HOME research – are more likely than other properties to be expensive to insulate. It’s therefore less likely that these homes will be able to access grants and funding to enable home upgrades to be made at no cost to the landlord than other types of private rented homes.

As a result, the minimum standard rules are less likely to apply in HMO situations than in other situations.

A related issue is that our research found that ECO funding (the major source of funding for energy efficiency measures) is unlikely to be spent on complicated and expensive-to-improve houses in multiple occupation. ECO funding will certainly not reach larger HMO properties that probably require non-domestic EPC assessments.

Finally, HMO tenants are very unlikely to take up Green Deal. A group of HMO tenants would have to agree to do this between themselves and as people often on lower incomes, HMO tenants may be particularly likely to fail Green Deal credit checks.

Conclusion

The MEPS are good news, and progress has been made to bring shared homes more firmly into scope.

Unless the government resolves the issues around ensuring compliance with EPC requirements, and introduces a minimum contribution requirement from landlords its hard to see the MEPs having anywhere near full effect. That’s the case for all types of private rented homes, but the problems are particularly acute in the HMO sector.

We also need clarity on the issue of the type of energy assessment that different HMOs require and how domestic energy efficiency standards and programmes apply to HMOs that are assessed using non-domestic energy assessments.