As a companion piece to a recent report on Managing Heat System Decarbonisation Eleanor Penney, from the MSc Environmental Technology here at Imperial College London, has written us a post on her (and her colleagues’) work looking at the current state of London’s rental sector in relation to energy efficiency.

In terms of reducing carbon emissions, the domestic heating sector might be one of the toughest challenges. Currently accounting for over 25% of the UK’s emissions, the next twenty years will probably see emissions from domestic housing rise [PDF], driven by rising house numbers, while nearly all other sectors are predicted to decline, with policies aimed at meeting reduction targets. A recent report from Imperial College London’s Centre for Energy Policy and Technology found that major work is necessary to improve 25 million homes to help meet the UK’s carbon emission reduction targets.

While it’s clear that the widespread changes necessary will require significant investment in infrastructure and technology, particularly given the ageing housing stock, we were interested to explore the role markets could play in cutting out the worst performers. Landlords are going to be banned from letting the homes rated F or G, but this won’t come in until 2018. Until then, the onus is on the tenant, with a new law obliging landlords to make any requested improvements, so long as they are cost-effective and ‘not unreasonable’. How realistic is this?

More energy-efficient houses are generally cheaper to run, and you might expect people to pay a premium to save on fuel costs, especially with our miserable UK winters. With energy efficiency labelling now a legal requirement, giving us a handy indicator of performance, we should be able to exercise these preferences. You would expect higher-performing houses to command a higher price – providing property owners with incentives to invest in improvements.

Since moving to London, I’ve been dismayed by the rental scene. Houses are often both very poor quality and very expensive – the average person spends over half their salary on rent, and prices are increasing by over 7% per year. Privately rented houses are the worst-performing in terms of energy efficiency, with high levels of fuel poverty associated with bands F and G.

The housing bubble is forcing more people to rent for longer, and as part of ‘generation rent’ I am aware of the social implications this is having on the city. Surely, with all of this, we could at least demand some improvements? Fuelled in part by noble concerns over climate change, and in part by indignation at one too many rude text messages from my landlord, myself and three of my classmates Dimitrios Chairetis, Yannick Hoegerle, and Bhanpavika Wangvitayakun began digging.

Firstly, we analysed the correlation between Energy Performance Certificate ratings of 800 houses listed on Zoopla and their asking price, controlling for location, distance from transport, and size. We found a slight but significant premium. Though there isn’t much analysis of this effect in rental markets, the same trend has been observed in house sales.

We were surprised to see how many properties from our total sample (2000) we had to discard because the score wasn’t published at all despite this being a legal requirement. Our sample was very small and a much larger study is needed to really understand these market trends. We spoke to landlords, who mostly said that they would make improvements only if it became a legal requirement. They cited the costs, and the difficulty of navigating the complicated government incentive schemes. We surveyed 500 tenants, who were generally in favour of paying more for improvements, but prioritised other factors in their house hunt. Unsurprisingly, people relished the chance to complain about the draughts!

Conclusion

The problem with London’s housing spreads far wider than the gaping energy leaks. If we are to meet any targets, a much more wholesale overhaul of the entire housing stock will be required – the UK’s housing stock is ageing and there is a limit to the improvement that can be done by retrofit. In the meantime, minimum standards should be more ambitious.