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Huge funding shortfall to decarbonise private rented sector

Wales needs an urgent strategy to plug a massive funding gap to bring private rented sector homes up to net zero standards.

That is the message from new research from Tyfu Tai Cymru (part of CIH Cymru) that outlines a 98% gap between currently available funding and the cost of reaching net zero by 2050.

The report calls on the Welsh Government to develop a long-term strategy for energy efficiency, fuel poverty and decarbonisation of the private rented sector (PRS) which integrates with broader objectives surrounding housing quality, fire safety and landlord licensing

It also looks at the technical and behavioural solutions needed to meet the targets for the decarbonisation and reduce fuel poverty for private tenants in Wales and sets out what landlords and tenants think and how Welsh Government can help this happen.

The private rented sector currently represents 16% of the Welsh housing stock and is the worst performing tenure in terms of energy efficiency. In 2020 it was estimated that 20% of private renters live in fuel poverty (spending more than 10% of their income to maintain a satisfactory heating regime) compared to 11% of owner occupiers and 9% of social housing tenants.

Alongside existing policies, and assuming the current Warm Homes Programme is continued through the 2020s, this leaves an 89% funding shortfall for meeting EPC C levels rising to 98% for the 2050 net-zero targets. Consequently, most funding will need to come from landlords and other forms of private financing.

Tyfu Tai Cymru developed decarbonisation scenarios for four main PRS house types. This showed a large variance in the cost and benefits of meeting these targets, suggesting fixed cost of compliance thresholds would be problematic, and new forms of financing are needed.

This report, authored by Dr Donal Brown of Sustainable Collective, Severn Wye Energy Agency and Sero, sets out energy modelling scenarios based on a sample of four common house types which characterise the Welsh private rented sector. The report also examines  four areas essential to delivering the retrofit agenda: tenant and landlord engagement: installer and supply chain coordination; funding and finance; and regulation and enforcement, before proposing solutions to overcoming these challenges.

The report recommends that:

  • Welsh Government should develop a long-term strategy for energy efficiency, fuel poverty and decarbonisation of the private rented sector and integrate with broader objectives surrounding housing quality, fire safety and landlord licensing
  • Welsh Government should engage with landlords and tenants in this process, including
  • communicating the benefits of the programme alongside tailored support, advice, funding, and delivery via local ‘One-Stop-Shops’
  • New regulations and standards are needed to drive the uptake of energy efficiency in the PRS, and in meeting net zero objectives. This will require increased resource and better enforcement, especially for local authorities
  • Increased grant funding and new forms of financing are needed. The affordability crisis means fuel poverty funding should increase significantly, alongside new property linked financing and tax incentives for landlords
  • A massive retrofit skills drive is needed, requiring public investment in new apprenticeships and a Welsh supply chain for low carbon technologies
  • Decarbonisation of the PRS will require low carbon heat, especially via heat pumps, requiring government to create a level playing field, encouraging new business models, policy changes and a subsidy regime to drive down costs.

Catherine May, Tyfu Tai Cymru manager said: ‘Whilst we’ve strongly welcomed the clear vision set out by the Welsh Government to deliver 20,000 low carbon social homes, and significantly improve the efficiency of existing homes in the social sector we also need to examine how landlords in the private sector can help deliver a zero carbon housing sector. Our report looks for answers and how we work in unison with landlords and tenants to ensure rented homes are good for the environment and for the tenants.’

Dr Donal Brown said: ‘The private rented sector is probably the most challenging area for Wales’ decarbonisation agenda. This report provides an essential exploration of challenges and proposes a series of concrete recommendations for how they can be overcome.’

Douglas Haig, director at the National Residential Landlords Association, commented: ‘Whilst the private rented sector has seen a dramatic improvement in the energy efficiency across its housing stock, it still has a long way to go to ensure governments can hit their carbon and fuel poverty targets.  This research demonstrates the support that is required to reach these levels in a reasonable timescale and we hope that the Welsh Government takes appropriate action to support the sector to achieve them.’


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