Landlords across the UK could be among the biggest beneficiaries of the Green Deal when it fully launches in early 2013.
That is the opinion of energy efficiency specialist Enact Energy, which was named in April by the Department of Energy and Climate Change as one of the Green Deal Pioneers.
The company, which will be one of the first in Britain able to offer landlords works under a Green Deal Plan or grant funding through ECO (Energy Company Obligation), believes that private landlords will be able to use the Green Deal to make significant energy efficiency improvements to their properties with little or no upfront costs to themselves, with tenants paying off the loan costs through their electricity bill.
Under the Green Deal there will be a list of over 40 types of energy efficient upgrades available which can be part or fully funded. The most common works are expected to be insulation, heating upgrades, renewable energy products such as solar and heat pumps, and double-glazed doors and windows.
Enact dismissed concerns raised by the Residential Landlords Association that the Green Deal could lead to tenant resistance because they will resent having to pay off a landlord’s loan via higher energy bills, and thus blight rental stock which has been improved via the Green Deal.
Enact said that the RLA’s views did not take account of the Green Deal’s Golden Rule, which should be clearly communicated to tenants.
The Golden Rule is that works done under the Green Deal must not cost more than the expected financial savings attached to the energy bill. In other words, tenants should be helped to understand that even with having to pay for the improvement, their bills should still be less than they would have been before.
Enact chairman Adrian Wright said: “Landlords will need the permission of the tenant to apply the loan to a property, so works will only be able to go ahead if they agree – a communication challenge that landlords must rise to if they are to see their properties benefit from the Green Deal.
“Alternatively, works can be installed during tenant void periods negating the tenant permission obstacle.
“Whilst it is the tenant who pays the loan, it is also the tenant who will benefit from the energy savings so through the Golden Rule they should be no worse off and will benefit from a warmer home with lower energy bills.
“With the Golden Rule in place, in theory, by taking advantage of the Green Deal, tenants will see a drop in their energy costs, the savings of which will pay for the loan and as energy prices rise, the savings will rise with them.”
He said that not all works offered under the Green Deal will meet the Golden Rule, however: works like double-glazing and renewable energy technologies are expensive to have installed relative to the energy savings they deliver.
In these cases, he said the landlord would need to pay an upfront payment towards the cost of the work or seek alternative personal finance and only charge a proportion on to the electricity bill as a Green Deal charge.