How will the Government's Clean Growth Strategy affect the property industry?

The strategy was produced to comply with the Climate Change Act 2008 and sets out how the Government intends to meet the fourth and fifth carbon budgets which should see carbon emissions cut to 57% below 1990 levels by 2032.

The strategy includes some significant proposals affecting commercial and residential properties that will affect landlords, property owners and tenants.

Key proposals impacting the property industry

• Energy efficiency – the strategy will have a major impact on both commercial and residential property over the next decade as there is a focus on improving the energy efficiency of new and existing commercial buildings, raising minimum standards of energy efficiency for rented commercial buildings and improving the energy efficiency of domestic homes.

• Building regulations – following the outcome of an independent review of Building Regulations and fire safety, and subject to its conclusions (the formal report is due in Spring 2018), the Government intends to consult on making improvements to Building Regulations requirements for new and existing commercial buildings. This will look to promote low carbon and higher energy efficiency heating, ventilation and air conditioning systems in new commercial buildings.

• Minimum Energy Efficiency Standards (MEES) – under The Energy Efficiency (Private Rented Property)(England and Wales) Regulations 2015 it will be unlawful for a landlord of a commercial property to grant a new tenancy of a property below an EPC rating of E on or after 1 April 2018 unless an exemption applies and has been validly registered. The Government intends to consult in 2018 on how best to improve the energy performance of these buildings through tighter minimum energy efficiency standards. Raising the MEES threshold (to D or even C) will bring many more properties within MEES and will have an impact on property transactions.

• EPC banding – in parallel with the above, the Government wants to further reduce emissions from domestic homes. Their ultimate aspiration is that as many homes as possible are improved to EPC Band C by 2035, where practical, cost-effective and affordable.

• Further improvements – future improvements are envisaged through a combination of investment in upgrades to existing homes; stricter obligations on private landlords of the worst performing properties; improvements to Building Regulations requirements which will apply to any new work (extensions to a property and other building work) to existing properties and improving standards for new boilers.

• Solar plus batteries – when an installer installs solar panels co-located with a battery in residential accommodation, this will attract a reduced VAT rate of 5%, provided that certain installation conditions are met.

• Smart meters – there is confirmation that every household will be offered a smart meter by their energy supplier by the end of 2020. The Government considers that promoting these smart appliances will allow consumers to benefit from using energy at times when it is cheaper, in order to make the energy market more competitive.

Whilst it is encouraging to see that the strategy aims to reduce carbon emissions from property and that clean growth is at the forefront of policy and economic decisions made by Government, many of the proposed changes are subject to further consultation. Therefore, we will have to wait and see what form the final changes take.