London Energy Efficiency Information

The UK Government is dedicated to ensuring that the country joins with other nations to improve the global environment for future generations. A major part of this commitment is improving the energy efficiency of domestic and commercial premises. This is likely to be a testing challenge, especially in London where energy efficiency levels have not been impressive to date.

Problems with energy efficiency standards in London

In 2016, the Association for the Conservation of Energy produced a report which provided some startling statistics about EPC ratings in London; 37% of all commercial premises in London have an Energy Performance Certificate (EPC) rating of E or lower, with the figure being 25% for domestic premises.

EPC ratings run from A to G, with A being the highest rating. This means that a large portion of property in London has an EPC rating that is at the lower end of the scale. This is not good news when it comes to the government’s energy efficiency promises. This is why it’s so important for energy efficiency issues in the capital to be addressed.

How to solve energy efficiency issues in the capital

It’s not just the government that is concerned about energy efficiency in London, Mayor Sadiq Khan also realises how important it is. He has announced the ambitious aim of having zero carbon emissions in the city by 2050. The City of London has also announced that it is joining the energy efficiency challenge. It has announced that by October 2018 all of the premises in the square mile will rely on renewable energy sources for power.

These initiatives are in addition to the introduction of Minimum Energy Efficiency Standards (MEES) which have been in place since April 2018. The MEES means that no landlord can create a new lease for a property that has an EPC rating of F or G. The scope of these standards will expand in the future; from 2020 it will apply to all domestic leases, even those that are already in place, and from 2033 it will apply to all commercial leases.

Some financial assistance is available for commercial landlords to make changes, in the form of a £500 million business energy efficiency fund (MEEF). Public sector organisations and small businesses can apply to the fund for financial help with adopting carbon reducing initiatives.

Energy efficiency and the buy-to-let issue in London

There is currently major concern amongst UK landlords, about the future of the buy-to-let market. The concern has been caused as it’s becoming more difficult for landlords to make a profit. There are three main reasons for this.

  • Increased cost of maintaining properties (including energy efficiency improvements)

The increased cost of maintaining properties is causing many London buy-to-let investors to consider selling.   These costs include the money that needs to be paid out in order to meet the MEES. There is no escaping from the fact that landlords have to make sure that their properties are energy efficient and any necessary improvements can require a significant amount of money to implement.

  • Stagnation of the London housing market

The housing market across the UK is experiencing difficulties, mostly due to uncertainty over Brexit and increases in stamp duty. The problem is most pronounced in London where the cost of property is higher. Many owners are reducing the sale price of property in order to sell more effectively. This is no good for buy-to-let property owners who need to know that they can secure a good selling price in order to ensure that they make a profit on their investment; this is the case even after rental income has been taken into account. This means that many landlords are choosing to sell now rather than see profits being further depleted.

  • Changes to tax rules

Prior to April 2017, landlords could deduct mortgage interest payments from their income, before they submitted their tax returns. This was especially useful as most landlords have interest only mortgages. The situation has changed and relief can only be gained on 75% of mortgage interest with a 20% tax credit applied to the rest. The amount of relief available will continue to decrease until only the tax credit will be available.

How an EPC can help London landlords

Any London property owner can benefit from investing in an EPC. This especially applies to landlords who need to know the current rating of their properties as a low rating may affect their ability to rent a property out. An EPC contains information about the current rating of a property and advice on what improvements can be made. For landlords who have current leases in place this is vital information as in the not too distant future they will be breaking the law if they continue renting a property that has a low EPC rating. Having the knowledge now gives them time to make improvements.

EPC certificates help any property owner to make beneficial energy efficiency changes. It’s not just the government and the mayor of London that are responsible for improving energy efficiency levels in London; it’s commercial and domestic property owners too. Energy efficiency levels in London are very important, if we want to protect the environment for future generations, and make financial savings today. Making the necessary changes has to be a joint effort.