23 May 2022
How are Actions 10 and 15 tackling the climate crisis?
A third of UK carbon emissions relate to housing, with poor heating systems and inefficient insulation in homes also contributing towards fuel poverty. Almost 19 million UK homes have an Energy Performance Certificate (EPC) rating of D or worse (ratings are from A to G). Privately rented homes are among the least energy efficient. Councils can use their enforcement powers in the private rented sector to help improve standards.
A key factor behind inefficient private sector housing is the reluctance of landlords to bring homes to the minimum legal standard for energy performance. This may be in part due to ignorance of what the regulations are, or that a property cannot be bought up to minimum standards due to age or other restrictions. However, any improvements would bring benefits to residents, reduce fuel poverty, and unlock significant carbon savings.
Legal standards, national targets and council powers
Minimum Energy Efficiency Standards were introduced for privately rented homes in 2018. Legislation requires privately rented properties to have a minimum EPC band E. Local authorities are responsible for enforcing the standards and can impose financial penalties on landlords that fail to comply in some way.
In addition, the government has a proposal for the majority of privately-rented properties in England and Wales up to at least EPC band C in the period from 2025 to 2028. Local authorities don’t currently have powers to insist on EPC ratings above the minimum legal standard but can encourage and incentivise landlords, including signposting to funding.
What Liverpool City Council is doing
Using the government EPC register data, Liverpool City Council has mapped the energy performance of privately rented homes in the city with particular attention to those that are lowest rating (F and G) on the basis of improving compliance with regulations.
From this data, it's taking a two-stage approach:
- Engagement and enforcement campaign targeting landlords in areas with the worst EPC ratings. This is a specific project using funding won through competition and provided by the Department for Business, Energy and Industrial Strategy (BEIS). The project is facilitated through the Midlands Energy Hub.
- Five-year selective licensing designation implemented from April 2022, in 16 (out of 30) council wards. The designation will be used to drive up standards and deal with poor property conditions. The fee income from the scheme will be ring-fenced to finance enforcement operations. This will also involve a review of EPCs.
The data mapping identified that Liverpool’s privately rented homes (which account for 32% of the city’s housing stock) include many ageing, poorly insulated properties with bad heating systems. Only one in three privately rented properties have an EPC rating of A to C and many are below the legal standard of E. But the council considers that 73% of F- and G-rated privately rented properties are "improvable".
Engaging with property owners
The project is targeting the worst G-rated properties, with a wider awareness campaign around energy efficiency running from September 2021 to March 2022. The BEIS funding was awarded on the basis that the city would find extensive and creative ways of engaging with the sector.
The project was launched with a press release, dedicated web page and leaflet for wider awareness-raising, as well as communication with owners of targeted properties. Letters were sent to private landlords owning over 300 poor properties, alerting them to regulations and prompting them to either upgrade, claim exemption or seek funding. Following a review of feedback, claims for exemptions and claims for updated EPCs, the city is taking direct enforcement action against 50+ properties, from issuing compliance notices to potential fines, within the tight timescale of the project (by end of March 2022).
- Raising awareness of the EPC system.
- How to improve EPC performance (ensuring windows and doors are properly fitted etc).
- Officers made landlords aware of any exemptions that may apply to Minimum Energy Efficiency Standards enforcement.
- The council also ran webinars facilitated by a leading local landlord to help get owners on board.
If the landlord does not engage or prove action has been taken after receiving two letters, the council issues compliance notices and reserves the right to issue a financial penalty. However, this is a last resort as the authority is keen that private landlords direct their finances into energy efficiency improvements rather than pay fines. In January 2022, the council issued the first of its 50+ compliance notices, which was the target set in the project's funding application.
At the end of the project, there will be an evaluation and learning points and the City Councils’ Private Sector Housing Enforcement Policy will be updated to include these powers.
Licensing and enforcement
Liverpool City Council will use its proactive licensing activity to improve the condition of rented properties in parts of the city where home energy efficiency is at its worst. This includes both mandatory HMO (houses in multiple occupation) and selective licensing properties.
The council previously ran a citywide selective licensing scheme between 2015 and 2020. This required all privately rented properties in Liverpool to be licensed. To be granted a licence, properties had to be suitable for occupation and comply with conditions relating to fire safety and other hazards but the licensing scheme did not at that stage include energy efficiency measures. By the end of the period, there were over 10,000 licence holders and nearly 52,000 properties licensed.
The introduction of Minimum Energy Efficiency Standards regulations in 2018 prompted the council to consider how the standards could be enforced locally, and how this could contribute to climate action efforts set out in Liverpool’s city plan.
Without a substantive licensing scheme, the council had to respond to an official complaint from tenants or their advocates about their EPC rating before officers could arrange a house visit. Sometimes, tenants themselves can be difficult to engage on EPCs, denying access or fear of retaliatory eviction should a tenant make a complaint about their landlord.
In December 2021, the council’s application for a new selective licensing designation based on poor housing conditions was approved by the government. This will be introduced on 1 April 2022 and run to 31 March 2027 covering 16 of 30 council wards and 80% of the city's private rented sector. Many of these have poor energy efficiency alongside other potential serious hazards.
The council will include EPC inspections in its checks on compliance with licensing conditions. The approach will be informed by the Minimum Energy Efficiency Standards project mentioned above, which ends at the same time the new selective licensing scheme starts in 2022.
By creating a consolidated approach with enforcement powers, the council can have a greater impact in tackling non-compliant landlords while creating positive relationships with landlords to make private renting safer and more comfortable for tenants. An intelligence-led approach allows local authorities to identify and take the strongest action with non-compliant landlords.
The fees were being finalised in January 2022. Under current proposals, the maximum licence fee will be £570 per property, with new landlords or landlords accessing an early bird rate paying a discounted fee of £400 per property.
Encouraging higher standards of energy efficiency
By building relationships with landlords the council can also encourage them to go above minimum legal standards.
Other incentives will include offering landlords with EPC ratings of C+ a further £50 discount per property. As before, income through this route will be ring-fenced to cover staffing costs used directly on inspections and the administration of the scheme.
What impact has the project had?
Liverpool's ongoing Minimum Energy Efficiency Standards enforcement project identified 1,960 properties with an EPC rating of below E.
The authority identified 467 properties that would require targeted action within the context of the BEIS-funded project. 108 properties improved EPC rating to E or above. Follow-up letters have been sent to 310 properties.
Following the two engagement letters, around 200 properties were still non-compliant and of these, 50+ were identified for more formal enforcement action starting with the issue of compliance letters in January 2022. This may lead to the issuing of penalty fines.
What made this work?
Engagement and education is critical
The council has prioritised proactively engaging landlords. It's invested in a range of communication tools including press releases, a website, leaflets and webinars. It's also got messages out through partner networks to tenants and resident groups.
Moreover, ahead of the new selective licensing designation in April 2022, there will be significant communication and engagement to potential licence holders, tenants, partners and other stakeholders in the targeted areas.
A range of benefits
A strong driver in enforcing the standards is the potential benefits to mental and physical health, as well as economic savings that can reach those living in poor conditions or those in fuel poverty.
For example, an F-rated property could cost twice as much to heat as an A-rated property, and a G-rated property three times as much. The carbon savings delivered by the project also directly relate to Liverpool’s City Plan, and this is another key motivation for enforcing the Minimum Energy Efficiency Standards.
Another key success factor has been a close relationship with Healthy Homes, Liverpool’s council-run fuel poverty service. Healthy Homes has shared knowledge of the city’s poorly performing housing where residents are thought to be living in fuel poverty. This has enabled targeting of these homes.
What resources were needed?
Liverpool City Council has received £70,000 of funding from the Department for Business, Energy and Industrial Strategy to undertake its work up to March 2022 related to the Minimum Energy Efficiency Standards. The funding was won in a competition facilitated by the Midlands Energy Hub.
There's no additional funding for the licensing scheme, which is intended to be cost-neutral.
The project is led by Liverpool City Council Private Sector Housing Service, which is responsible for all housing licensing and enforcement functions. The project identified the city’s least efficient homes using a range of sources including housing condition surveys and the EPC register.
Lessons from Liverpool
Liaising with other council departments and legal complexities
Minimum Energy Efficiency Standards legislation is complex, and regulations can overlap with existing legislation such as the Housing Health and Safety Rating System. This can cause different council departments to disagree on the correct interpretation of the legislation.
It's important to work with internal departments, such as multiple housing teams and trading standards, to set a clear policy and objective, understanding that each department has different priorities amongst the many social issues facing private tenants.
Although the government has shown confidence in Liverpool by approving a significant licensing scheme, the regulatory landscape is complex with different legislation and powers. This has been acknowledged in a recent National Audit Office report. As part of its reporting on a new scheme, Liverpool will be reporting to government as well as regular public facing reports on progress.
Learnings from the first round of licensing projects
The council learned from its first private landlord licensing programme that positive engagement should be the priority. It's better to provide information and support to landlords, while using examples of good practice within the sector to encourage action. This can reduce time and money spent on compliance issues further down the line.
Friends of the Earth view
This is a great example of a council acting on the powers it has now. Liverpool is ahead of most councils in targeting fuel poverty in the private rented sector.
The UK government has promised to improve housing standards in the private rented sector but councils should not delay taking their own action. Also, councils should improve standards of energy efficiency in social housing (Action 13) and help owner-occupiers (Action 24 of the Climate Action Plan).
Friends of the Earth is showcasing specific examples of good practice in tackling climate change, but that doesn’t mean we endorse everything that council is doing.
This case study was produced by Ashden and Friends of the Earth.