Energy efficiency should be factored into social rents, a housing body has said.
In a report, The Housing Forum said the social rent formula should be updated so that tenants pay on average the same amount in total in rent and bills.
These ‘warm rents’ would mean tenants with high energy bills pay less rent, while those in more energy-efficient properties pay more.
Currently in England, 60% of social homes meet an Energy Performance Certificate (EPC) rating of C or above. Tenants in a D-rated home face bills up to twice as high as those in a B-rated property.
The policy paper suggested the total cost of rent and bills should be “evened out” within four years, providing “a fairer deal for tenants.”
Higher rents for green homes would also provide an incentive for social landlords to upgrade their properties, the report said, as well as generate capacity for private finance to help fund some of the upgrades.
Currently there is no way for social landlords to recoup the considerable cost of insulating properties, leaving many registered providers reliant on grant funding to complete these works.
The analysis was centred on a C-rated property, which the authors said meant the immediate impact on social landlords’ rental income would be “broadly neutral”. Over time, however, landlords’ rental income would increase as homes become more energy efficient.
The Housing Forum cautioned that increasing rent on more energy-efficient homes could reduce the incentive for residents to co-operate with retrofitting. To avoid this, it said, rent increases could be postponed for the first few years or delayed until the property is next relet.
Jamie Ratcliffe, chief communities and sustainability officer at Sovereign Network Group and deputy chair of The Housing Forum, said: “At present, the complicated formulas for social rents take no account of the cost to heat a home and they should.
“A warm rent would increase the funding options available to landlords and be fairer to tenants.”
Ian McDermott, chief executive of Peabody, said: “We support the principle of taking thermal comfort and energy efficiency into account in the future social rent formula.”
However, he added “we are concerned about additional complexity” and that any changes would “need to enshrine affordability in rents and service charges while safeguarding landlords’ ability to invest for the long term”.
The current standardised formula for social rents was set in 2001, based on property size and location. Annual increases for social rents are capped by central government and tend to allow rents to be increased each year by the Consumer Price Index (CPI) inflation plus one percentage point. Although, some lower caps have been imposed in recent years.
A Department for Levelling Up, Housing and Communities spokesperson said: “Everyone has the right to a warm, secure and decent home, and we expect social landlords to meet our Decent Homes Standard before letting properties.
“Landlords are already making excellent progress in improving the energy efficiency in their homes, with the proportion of social homes at EPC C or above rising from 48% to 70% since 2017.”
It comes as one London council has been issuing eviction threats to heat network users after it dramatically hiked fuel bills last year.
The boss of a major landlord recently said annual rent settlements are “madness” and have “got to change.”
HousingToday
