MEES – how the requirement might affect the registered provider sector

Author: 13/04/2015

The Government recently announced its latest domestic energy efficiency proposals in England and Wales. The Minimum Energy Efficiency Standards (MEES) take effect in the private rented sector as of 1 April 2018, and include a requirement for eligible properties to have a minimum E EPC rating before they can be rented out. How might MEES affect registered providers?

Housing associations are continually churning their tenanted stock through property disposals, re-profiling their asset bases and releasing funds for investing in new properties and improvements to their retained stock. From the registered providers’ perspective, the time to sell low EPC-rated properties into the private rented sector could be running out as most private landlords won’t want to invest in upgrading properties.

  • Will that depress the market for registered provider sellers in the run-up to the deadline?
  • Will property values be forced down as a consequence?
  • Will a greater proportion of disposals sell to owner occupiers?
  • What might the impact be on fuel poverty, public health and the wider societal environment?

The primary objective of MEES is to improve the energy performance of the worst performing homes in the private rented sector. As private landlords offload and registered providers churn, two streams of low-quality properties will come to the market. Savvy landlords will pick up ex-registered provider properties that only just fail to meet MEES and can be improved easily and cheaply.

The costs of upgrading

Whether they’re brought to the market by registered providers or private landlords, some of these low-quality properties will be bought by first-time owner-occupiers, encouraged by the opportunity to buy a house at a cheaper than usual price and hoping to fulfil their dream of getting onto the property ladder. Unfortunately, many of their dreams will be shattered when they realise how much it’ll cost to upgrade their newly-bought properties. What’s more, many of these buyers might be ‘financially on the edge’, not having enough disposable income to either maintain their houses adequately or keep them sufficiently warm, let alone upgrade them.

Another unfortunate consequence is that, having moved these properties into the private sector, they’ll not be subject to the same stringent energy efficiency legislation. As a result, many of their new owners might end up living in poor conditions or fuel poverty, with little chance of improving their situation.

Will this set of circumstances create further bifurcation in the market, leaving a legacy of deprived housing areas made up of derelict properties (that are too costly to improve) and owner occupied properties lived in by financially stretched and fuel poor families? 

Is there another way?

Registered providers represent the most professional organisations operating in the rented homes sector and have enormous experience at managing efficient, large-scale repairs, maintenance and improvement programmes.

  • Could a mechanism be developed that makes use of this professionalism to improve those properties that need it most, especially if they’re already in registered provider ownership?
  • Could such a mechanism improve properties before they are released onto the open market, thereby avoiding further difficulties arising from ‘pepperpot’ refurbishment, and heading off the risk of creating low-quality owner occupied homes?
  • Could a separate body buy up poorly performing homes  that are offered for sale by registered providers, private landlords or private individuals - and provide a professional improvement refurbishment service before releasing them into the open market as ‘good as new’ homes, perhaps with new warranties?

Just a thought…