Climate committee seeks more regulation

At the end of June, the Climate Change Committee (CCC) released its 2022 progress report to parliament. Unsurprisingly, a number of the recommendations target the built environment and highlight the steps needed to get us to net zero.

What is already in place?

Since 1 April 2018 it has been unlawful to grant a new tenancy of a property with an EPC rating below E unless an exemption applies and has been validly registered on the PRS Exemptions Register. On 1 April 2020 this was extended for domestic properties, catching existing as well as new tenancies. Tenanted non-domestic properties will need to be at least EPC level E by 1 April next year, unless an exemption applies and has been registered. However, this only catches a small proportion of building stock.

In anticipation of more stringent regulation, in 2020 the government consulted on increasing the minimum EPC level for the domestic private rented sector to C by 2028. A consultation for non-domestic properties followed in 2021. The proposals suggested raising the minimum standard for domestic properties in a similar way to that used in 2018 – application to new tenancies from 2025, with all tenancies being affected from 2028.

The proposed approach for non-domestic properties is slightly different, with tenanted non-domestic properties required to reach level C by 2027, rising to B in 2030. Government responses to both consultations are outstanding. It seems inevitable that minimum EPC levels will rise, but other projects are also on the cards – for example, the introduction of a national performance-based policy framework for rating the energy and carbon performance of commercial and industrial buildings above 1,000m². Again, the government is yet to respond to this consultation.

What has the CCC recommended?

The CCC recommendations highlight that these proposals need to be taken forward, with the report saying the government should “legislate to require privately rented homes in England and Wales to reach EPC C by 2030 (as was promised in autumn 2021)”.

However, there is a strong sense in the report that legislation for privately rented properties (both domestic and non-domestic) is not enough, and there is a push for legislation in relation to owner-occupied properties. For domestic properties, the government is advised to “develop and publish new policies (with a clear implementation timeline) to ensure that owner-occupied homes reach a minimum energy performance of EPC C by 2035, through incentives or regulation”. The recommendations are less prescriptive for non-domestic properties, the recommendation being to “publish proposals for a minimum EPC in owner-occupied commercial buildings”.

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However, it is important to remember that the EPC rating does not tell the whole story. A property with a good EPC rating can be used inefficiently, and the CCC recommends the implementation of a performance-based rating scheme for offices (as proposed in the 2021 consultation), with a timeline for extending this to other building types. This recommendation goes hand in hand with that to “publish clear plans to move towards in-use performance metrics for buildings, with clear timescales and responsibilities [and] consider the case for moving towards Green Buildings Passports”.

The effects of climate change are also highlighted; the built environment needs to be able to cope with risks of increased heat and flooding. Consequently, the government is advised to “expand overheating requirement in building regulations to cover refurbishments of existing buildings and conversions of non-residential buildings to residential”. Also, to carry out further work on flood risk, with assessments for new developments required to consider “2°C and 4°C climate scenarios, the risk of flooding to local infrastructure and include a consideration of better preparedness as set out in the Government’s recent FCERM [flood and coastal erosion risk management] policy statement”.

What are the likely obstacles?

Cost is a clear obstacle to implementation of net zero strategies, but it is not the only one. Current supply chain issues and a lack of skilled labour to carry out the necessary works are also factors. Bringing in more stringent EPC standards is the stick, which will result in improved ratings for a proportion of our building stock, but could also result in a rise in the registration of exemptions, which will not improve building quality but will increase the administrative burden on property owners.

And the EPC rating is just one metric – in-use performance data may well prove more useful.

Rather than legislation, will the real push be the effect on value of having a sustainable property? This will be beneficial for those who are able to push their ratings up, but it could leave those with properties that are less easy to improve with wasting assets, unable to get finance. For the owners of these properties, access to government support and finance on reasonable terms will be key.

Alexandra Holsgrove Jones is a senior knowledge lawyer at UK law firm TLT