Renewable Energy in the Private Rented Sector

Moving towards net zero. How can we get there? Who needs to make changes? What help is out there?

Recent news from the Government and Labour Party seems to indicate that their ambitions seem to prioritise winning the next general election and not tackling Climate Change. 

I am confident that all Local Authorities have Road Maps in place, but having the right implementation strategy to use funding available is sadly lacking. If allocated funding is not used by Local Authorities for the specific project, then the funding goes back to the Government.

The installation of gas boilers was supposed to cease in 2030. This date has now moved to 2035. 

The majority of the properties we manage have gas central heating, so at some stage we will need a Plan. Owner Occupiers have a completely different set of priorities to Landlords.

In this article, I wanted to discuss options – but don’t expect a definitive answer to “what is the Plan?’

The benefits, currently, to a landlord to install a air source or ground source heat pump, possibly linked with a Photovoltaic Solar system for hot water are as follows:

• Tax breaks
• Better quality tenants
• Higher rents
• Increase in capital value of the property and enhanced saleability 

The wider benefits are:

• Easing the cost of living crisis with lower household bills
• Solving fuel poverty
• Reduced demand on energy

What are the Tax Breaks?  

Solar panels or heat pumps could be considered as plant & machinery, therefore eligible for 100% tax write off under Annual Investment Allowance. For the next 5 years there is no VAT on solar panels. However, both solar panels and heat pumps are considered as enhancement to a property and are thus not claimable against rental expense. We advise that you seek professional advice from a tax expert .

Better Quality tenants

The question is ” will a property using renewable energy source rather than a gas fired boiler be more or less appealing to a prospective tenant?” The running costs of that property would be significantly cheaper and therefore see more enquiries. More enquiries does not necessarily mean a better quality tenant, but its our view that if a landlord invests heavily to provide a better home, then a tenant respects that property more.

Will the property achieve a higher Rent?

Almost certainly the answer is yes. We are already seeing that the new build properties in West Cambourne and in Roman’s Gate, Godmanchester are achieving higher rents than elsewhere. This is partly due to the fact that all the fitments are modern and new, but also because the properties are more energy efficient so reducing monthly bills.

Will the value of the property increase?

When we first started selling properties with solar panels the capital value was no different. largely because the technology was new and not fully understood with “feed-in” tariffs. But now, the answer is a huge “yes”. Both saleability and values are higher especially when heating is via a heat pump linked to an underfloor heating system.

What is our advice and opinion?

On a personal level I am very worried about climate change. I try and make the most responsible decisions I can.

On a business level, can I recommend a landlord spends £20,000 – £25,000 on replacing an old gas boiler with an air source heat pump linked to a PV solar array?

Depending on the property, I can argue that over 5 years the extra rent could be worth between £6,000 and £12,000, and that the capital value could be increased by £10,000 to £20,000.

However, the Government must incentivise landlords with much bigger grants than we have seen.