We must include rented properties in our drive to upgrade 500,000 homes to a more energy efficient standard by 2030, making them warmer and cheaper to run for renters
the Minister for Communications, Climate Action and Environment Richard Bruton, T.D. said today (6th of December 2019) announcing a consultation around options to encourage energy efficiency upgrades in rented properties.
The Built Environment accounts for nearly 13% of Ireland’s emissions. The Government’s Climate Action Plan commits to upgrade 500,000 homes to B2 or cost optimal energy efficiency standard by 2030.
Rented properties, especially older rented properties, are often less energy efficient than owner occupied properties because of the split incentive problem. A split incentive occurs because landlords, who would have to meet the cost of the improvements, do not reap the benefits of a warmer home and cheaper energy bills. Tenants, on the other hand, do not own the property and therefore have little incentive to invest - so neither party is motivated to upgrade the building.
As a result, tenants’ heating bills can often be higher than they could be. More energy is used, resulting in higher emissions. This is a problem encountered internationally.
Minister Bruton said,
We must address this issue. It is estimated that around 21% of private rented accommodation have a BER rating of F or G. Today we are outlining a number of options to address the problem. Improved properties will be welcome for tenants and landlords alike because they will result in improved living conditions, better health outcomes and enhanced asset value. The environmental impact will be significant, with lower energy bills and lower emissions.
A number of options are outlined in the consultation open from today including:
- Introduce regulations requiring all commercial buildings to attain a minimum building energy rating (BER) by a specified date in the future
- Encourage more use of ‘green’ leases to encourage co-operation between the landlord and tenant to achieve beneficial environmental outcomes
- Provide for a Right of commercial property tenant to initiate improvements
- An enhanced grant for landlords who upgrades their rented property and their own home at the same time; provided both properties are brought up to specified BER standards
- Link participation by a landlord in the HAP scheme for a defined period of time to a free energy efficiency upgrade
- Introduce a Cost Balancing Arrangement, whereby a landlord unable or unwilling to upgrade to minimum BER standard, compensates tenant for higher heating bills
All options will be put out to consultation from today. The consultation will remain open until 17th January 2020. Interested parties are welcome to submit and the consultation is now live here
Completion of a consultation on this matter is a key action under the Climate Action Plan, the Government's plan to ensure we meet our 2030 climate commitments and put us on a trajectory to be net zero by 2050.
Notes for Editors
A split incentive occurs where the benefits do not primarily accrue to the person who pays for the transaction. As the landlord is usually not the one paying the energy bills s/he is usually less likely to invest to improve net energy performance of the property. Similarly, tenants have little motivation to invest.
To date over 400,000 householders have improved the energy efficiency of their homes with grant assistance from the SEAI while others have done so with assistance from their energy supplier under the Energy Efficiency Obligation Scheme.
An Expert Advisory Group – chaired by The Department of Communications, Climate Action and Environment – with representative from the Building Standards and Rental Properties divisions of the Department of Housing Planning & Local Government, the SEAI, and the Residential Tenancies Board - has looked at examples of international best practice which may be relevant to Ireland and have outlined some other options which may be beneficial. This has informed the options in the consultation paper.
The consultation paper and the response template outline the issue while acknowledging the reality of the current accommodation shortage in Ireland. The documents set out a range of possible policy approaches for both the residential and non-residential sectors. These take account of research on approaches in other jurisdictions and stakeholder input as well as having regard to present accommodation challenges.
Green leases
A ‘Green Lease” is essentially a normal commercial lease with additional green clauses incorporated to facilitate and or encourage co-operation between the landlord and tenant to achieve beneficial environmental outcomes. Green lease clauses are already applied to some extent in Ireland. There is no international standard definition of what a ‘green lease’ should be or do. It usually encourages and facilitates tenant–landlord cooperation by promoting collaboration and fostering better communication between the parties. This means that the rental contract can provide a mechanism and opportunities to address environmental issues including energy efficiency or other sustainability goals. Green Lease clauses are becoming increasingly popular.
Green clauses might for example provide
- that it is the intention of the landlord and the tenant to promote the reduction of emissions
- an engagement mechanism e.g. “Building management Forum” to consider the adequacy and improvement of data sharing on energy and water use ..... agree targets and strategies to improve the environmental performance
- tenant may, with landlords consent, carry out alterations which will improve the environmental performance of the premises
- tenant shall not to carry out any repairs/modifications which would adversely affect the energy performance of the building
- Landlord and tenant shall use reasonable endeavours to share environmental performance data relating to the premises on a regular basis