The Green Deal

    The Green Deal promised a ‘win-win’ situation for Landlords of energy-inefficient homes. By accessing loans to pay for measures to improve a property’s energy efficiency, Landlords benefit from an improved property; and because the loan is paid back via energy bills over several years, there are no costs up front.

    Under the Green Deal’s ‘Golden Rule’, the reduction in energy bills resulting from improved energy efficiency must equal or exceed the increase caused by the loan repayment.

    It sounds logical, but we believe the model for assessing the reduction in energy costs resulting from a new installation could be flawed.

    Surely it relies on consistent energy demand over the course of the scheme? Yet energy use varies according to simple things like how warm someone likes their house and how many baths they take. And what if a family house has been assessed for the Green Deal under full occupation and energy use, only for the children to leave home, leaving the parents to keep repaying a charge based on the old high energy use? Can the Golden Rule ever be a long-term certainty when tenancies and occupiers can change from year to year?

    Interest rates under the Green Deal are rumoured to be around 7%, but many property owners will probably have access to better secured lending facilities, possibly for half of that. They might be better off self-financing the improvements and recovering the costs from the tenant/occupier, whether via a surcharge or as part of the rent.

    Other uncertainties include how much liability the Landlord accepts when a property is vacant between lettings; how simple it will be to take a property back in hand for refurbishment; and whether the scheme will ever work for very old and/or Listed properties. The fact that Landlords will not be allowed unreasonably to refuse requests from tenants to improve energy efficiency is also unsettling.

    We hope to be able to report on some successful trials in due course, but for now there are concerns that need addressing. However, considering the potential impacts of the scheme on Landlords, we are cautiously optimistic.