Landlords have switched on to a ‘smart tax’ driving powering energy improvements.
The ‘smart tax’ is an RLA response to calls from the Business, Energy and Industrial Strategy Select Committee for an increase to the amount that PRS landlords of the most energy inefficient properties should contribute to meeting the required standards.
“Whilst we believe rented homes should be as energy efficient as possible, this requires a tax system that properly supports and encourages investment in energy efficiency measures.
“It is disappointing that despite calls by the RLA and others the Committee has retreated to a call to raise costs for landlords without any support from Government,” said RLA policy director David Smith.
“This stands in stark contrast to the £3.8bn the Committee recommends the Government makes available to the social sector for such improvements,” he said.
Under the Government’s Minimum Energy Efficiency Standards landlords with properties in the lowest energy efficiency bands (F or G) are expected to contribute up to £3,500 towards the cost of bringing them to an E or better. The Committee recommends raising this to £5,000.
Government data shows that between 2007 and 2017, the proportion of private rented homes with an energy performance rating of F or G fell from 22 per cent to 6 per cent.
The RLA proposes that any work that a landlord carries out to their properties that is recommended on an Energy Performance Certificate (EPC) should be tax deductible. This would encourage continuous energy improvements rather than just meeting the minimum threshold.
The Committee’s inquiry saw widespread calls for tax reforms to support investment in energy efficiency measures.
This includes from the Energy Saving Trust, whose Chief Executive, Philip Sellwood, told the Committee: “There is no reason why we could not use the tax system to incentivise landlords through tax relief, so that they could claim all of that, rather than just £3,500, £5,000 or whatever.”
Lawrence Slade, Chief Executive of Energy UK supported the re-introduction of the Landlord Energy Savings Allowance (LESA) arguing that: “This would be a perfect example of carrot and stick: “Yes, you have to invest in the properties you own, but actually there is a tax-saving opportunity for you there.” The Government have missed a trick in not looking at that again.”
The re-introduction of the LESA was also supported by the Association for Decentralised Energy.
Shirley Rodrigues, Deputy Mayor for Environment and Energy at the Greater London Authority, said: “We think incentives and tax allowances would really help to get landlords taking this up and addressing this really big problem.”