E3G, an independent climate change think tank, published an Autumn Budget briefing on 19 July 2023 setting out fiscal measures it says the Treasury should adopt to raise energy efficiency in the private rented sector1. The briefing proposes allowing energy efficiency improvements to be offset against rental income, and supporting green lending and demand aggregation schemes, potentially through the UK Infrastructure Bank1.
The briefing states that a quarter of renting households in England live in fuel poverty, and that government proposals to tighten energy efficiency regulation could save renters £570 per year on their energy bills1. It cites Citizens Advice findings that renters face widespread problems with damp, mould and cold, with 1.6 million children exposed to these conditions1. Around two-thirds of privately rented properties in England and Wales fall below EPC C, the government's target rating for all fuel-poor homes by 20301.
On tax, the briefing says individual landlords pay income tax on rental properties at the same rates as other earned income, and may deduct costs including property management, legal fees, replacement furniture, insurance, utility bills, ground rent and maintenance and upkeep, but not energy-saving improvements1. It cites National Residential Landlord Association research finding that 72% of landlords not planning to improve their property in the next two years would reconsider if tax deductibility rules changed1. It also notes that France, Germany and Scotland have introduced tax incentives and green loans to support higher standards1.
"By introducing fiscal support in the Autumn Budget, the Treasury can pave the way for higher standards in the private rented sector."
The briefing does not set out costings for the measures, and no Treasury response to it has been reported1.
Why it matters for households
The private rented sector is where energy efficiency improvements are hardest to bring about, because the person who pays for an upgrade is usually not the person who pays the bill. The briefing's central argument is that the tax system currently treats energy-saving work differently from other landlord costs, and that changing this could shift investment decisions1. For a renting household, the practical effect of an upgrade is a warmer home and a lower bill; the £570 annual saving figure cited by E3G is the scale the government's own consultation on tighter standards is associated with1. The briefing also points to the condition of the stock: with around two-thirds of privately rented properties in England and Wales below EPC C, most rented homes would need work to reach the standard the government has set as a target for fuel-poor homes by 20301. The briefing notes that other countries, including Scotland within the UK, have used tax incentives and green loans, so the policy question is one of fiscal design rather than untested ground1.
What happens next
The briefing was published ahead of the Autumn Budget, and its proposals are addressed to the Treasury1. No date has been reported for a Treasury decision on the measures, and no further steps have been announced1.