My Lords, I thank the Minister once again for his exemplary introduction to the regulations before the Committee today. I note that, at last, we have come out of the jurisdiction of no-deal outcomes to look at matters of great importance that are, nevertheless, outwith our previous debates on the tranches of SIs that deal with a no-deal scenario.
We come now to the important aspect of energy efficiency, a necessary and effective part of our infrastructure improvement to reduce and remove carbon emissions in the longer term. I always thought that it was a very key part of the Green Deal, introduced—
I hasten to advise the noble Lord, Lord Fox—during the coalition years under a Liberal Democrat Minister of State in DECC, and it was to his great regret that it eventually collapsed, as we showed at the time, through very great difficulties in its construction.
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This SI provides amendments to the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, which introduced mechanisms to require landlords to improve their properties so that they could reach the minimum long-term lettable level of EPC band E by 2020 following that primary legislation. If they have not improved to this standard or do not have an exemption certificate after this date, such properties will be deemed substandard, and in principle not legal to let.
The Green Deal came in in 2011 and was of such complexity and difficulty that it took four years to produce the 2015 regulations. However, they were cancelled almost immediately afterwards following their difficulties. The regulations relied extensively on the assumption that bill payers could avail themselves of the Green Deal to improve their properties, and the cost to the landlord was appraised on that basis—that is, if a landlord had an assessment and the improvements were economic up to band E with a Green Deal loan programme, that would discharge his or her improvement responsibility.
However, with the cancellation of the Green Deal, the SI became inoperable; hence it has taken another four years for the 2018 amendment regulations to retain the requirement to improve and the level of improvements to aspire to, but they substitute for the “no cost to landlord” provisions related to the Green Deal a maximum spend for an F-rated or G-rated property of £3,500 by the landlord in order to reach the minimum. If the property cannot be improved to band E for that sum and the landlord can show that he or she has spent the maximum on it, a certificate of high-cost exemption can be applied for, which exempts the landlord from doing further work to bring the property up to band E.
As I said, the original 2015 regulations took four years to arrive following the passage of the Energy Act 2011, and they collapsed almost immediately. As simple arithmetic shows, there has been an eight-year period to bring various features to improve the energy efficiency of homes. They have eventually been laid following tortuous argument about the level of financial liability which landlords should be responsible for when they rent out very poorly insulated properties in bands F and G, and the point at which they should then be able to rent out such low-standard properties after 2020 if exempted from the full cost of raising the standard of the property.
The Government’s consultation proposal was that landlords should be exempted after a maximum of £2,500 of expenditure. This received a frosty reception from consultees, 79% of whom argued that the limit was too low. Among other arguments put forward, it was pointed out that, according to the Government’s own impact assessment figures, only 30% of F and G properties would be uprated at that level; the rest were to be exempted. The favoured level of landlord
contribution of £5,000 was endorsed by half of the total number of consultees, and 60% of those said that the £2,500 level was too low. Impact assessment projections suggested that, with a £5,000 level in place, some 73% of F and G properties would successfully be rated up to band E.
The first thing to be said is that on this side of the House we somewhat regret the lower level that the Government put into the regulations. Indeed, the Government’s response to the consultation was to concede the uprated figure of £3,500, which has been incorporated into this SI, as their operational alternative to the 2015 SI. This would mean that 48% of properties would reach the required level. In other words, turning it upside down, it means that 52%, the majority of properties, would end up exempt, with the landlord not required to do any more to an F or G-rated property let out after 2020.
So while we support the fact that a cap is now in place that creates an environment for the improvement of properties, removes uncertainty and will necessarily increase minimum standards, nevertheless the assumption that properties in another category of multiple occupancy are still largely excused from the regulations for a further five years is particularly regrettable. We regret that this lower level has been introduced. I ask the Minister whether the Green Deal could be repurposed to provide finance for landlords, above the £3,500 level, to £5,000, such that the future affordability of this very necessary amendment to implement the Green Deal could be brought forward.