As described in SmartKlub’s previous blogs there are social, economic and environmental benefits to upgrading the UK’s housing stock to improve energy efficiency levels. The upfront costs of retrofit can be off-putting to landlords. However, this blog shows how landlords and mortgage lenders can economically benefit from more energy efficient homes.
In the UK it has been estimated that owners of energy efficient homes are 32% less likely to default on their mortgages. A study by the Institute of Market Transformation (IMT) found that the default risks on energy-efficient homes were 32% lower than standard homes because energy efficiency saves money making more available for mortgage repayment. Furthermore, energy estimate costs that factor in efficiency would allow banks to better estimate mortgage affordability and the associated risks.
Residents of private rented accommodation are 19% more likely to be living in fuel poverty than in other tenures. Properties with a lower Energy Performance Certificate (EPC) score tend to be, on average, in arrears for two weeks longer than those in higher bands. Studies from Sustainable Homes suggest that improving 10,000 homes from EPC 65 to 75 could generate £90,000 from reduced rent arrears. Organisations, such as Sustainable Homes, have been calling for landlords to invest in energy efficiency measures. Even with initial upfront costs it is expected that the overall costs of running the homes would go down as less would be spent on energy bills.
Void days occur when rented accommodation remains empty between tenants. Sustainable Homes has reported that energy efficient properties have a lower number of void days. In fact, 18% more void days occurred for buildings with an EPC rating of F and E, than in D and 30% larger than those in B. Energy efficiency measures create extra costs for landlords, however, energy efficiency measures could save landlords £90 per void property annually.
Landlords and homeowners are often reluctant to improve the energy efficiency of properties because of high upfront costs and hassle. However, the economic benefits to mortgages, rent arrears and void days suggest that these measures could save money in areas that they may not previously have considered. Let us know if you have heard of any case studies, we would love you to join in the discussion!
To find out more about this topic, download the Sustainable Homes Report http://www.sustainablehomes.co.uk/research-project/rent-arrears/
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