Touching voids

The impact of energyefficiency on social landlordincome and business plans

TouchingThe voids

SUSTA INABLE HOMES

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The last 18 months have beena tumultuous time for sociallandlords: rent reductions,changes to grants, as well asthe extension of Right to Buy. At the same time the transition touniversal credit, with residents becomingmore responsible for their finances,means some are likely to face difficultiesin keeping up with rent. As organisationswith a social purpose – meeting a needfor high quality, affordable housing – thispresents a real challenge for sociallandlords. how to maintain thecommitment in the face of thesepressures on budgets, combined withreduced funding on the table forimprovements to stock?

Arrears are a big problem for the sector;an analysis by the national housingFederation found that 1 in 10 sociallandlords have more than £1 million inrents outstanding. And contrary to thepicture sometimes painted in the nationalmedia, there are areas of the countrywhere properties lying empty, or void, aremuch more of an issue than an excess ofdemand. As well as blightingneighbourhoods this is a root cause ofanti-social behaviour and other issuesthat are an extra cost for social landlordsto deal with.

We know that residents really value highquality homes that are affordable to run,and above all, comfortable to live in. if wecan show that by investing in better, moreenergy efficient homes we can have a

material impact on lowering fuel bills,reducing rent arrears, addressing voidsand improving the bottom line for sociallandlords it would present a ‘win-win’ –good for residents and good forlandlords.

This is the task begun in this report – in itsustainable homes convincingly shows alink between energy efficient housing andreduced rent arrears and voids. Theresults are compelling and need to beconsidered by everyone with an interestin the issues. The finance, planning,development, sustainability and assetmanagement teams of social landlordscan all benefit by coming togetheraround a shared approach. This can behelped by central and local governmentsupport.

sustainability, which speaks to the widerneed for everyone to reduce theirenvironmental impacts, is still a pressingneed as it ever was. More warm,comfortable homes, where residents areable to afford the rent as well as theenergy bills makes economic sense aswell as reducing environmental impactsand improving people’s quality of life. Allthe more reason why truly sustainablehomes should be the default forgovernment, local authorities, regulatorsand social housing providers.

Foreword

Lord Matthew Taylor

June 2016

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executive summaryThis study sets out to investigatewhether energy efficiencyimprovements to homes that reduceenergy bills provide any reduction invoids, rent arrears and other costsfaced by landlords. it was inspired byexamples from different sociallandlords that rent arrears and voidperiods reduce when properties aremade more energy efficient throughinvestments in insulation, new boilersor other improvements. There is profound interest in the housing sector on thelink between energy costs, voids and rent arrears. it is asignificant link – by reducing voids social landlords canmake better use of assets, save money and invest inmore ambitious business plans while improving thequality of life for residents and meeting up to ourshared environmental challenge.

Twenty-five social landlords managing over 500,000homes in england and Wales supported this research.They provided data on the energy efficiency of theirhomes as measured by the energy Performancecertificate (ePc) along with rent arrears and voids data.

“Improving rental income makesus more viable. Reducing rentarrears and voids is a key part ofthat. Reducing those costsenables us to build more homes”

Anne McLoughlin, Operations DirectorHastoe Group

Touching The voids

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l There is a correlation between the energy efficiencyof the homes and the number of void days. Ashomes become more energy efficient they are voidfor a shorter length of time - on average band Bproperties remained void for 31% less time thanthose in bands e and F.

l Administration costs are considerable for voids.Landlords with more energy efficient stock arespending less on refurbishing void homes, less onrepairs and less on staff time to manage voids.

l The levels of rent arrears experienced by landlordsranged between 3.5% and 28%, with an average of14%. There is a correlation between length of timein arrears and energy efficiency of homes.

l colder homes, especially those in band F, have onaverage two weeks more rent arrears than the restof the bands each year. The highest performingband A properties spent 30% less time in arrearscompared with the worst performing homes.

l An analysis of further costs incurred shows thattime spent seeking overdue rent payments, legalcosts and court costs decline by around 35% formore energy efficient homes.

overall, there is a strong correlation between lowerrent arrears, lower void rates and more energy efficientproperties. This shows that improving the energyefficiency of properties can bring financial benefits tolandlords, as well as for residents and the environment.

A key finding of the research is that the wider costs oftackling rent arrears and voids are both significant andcan be reduced. The time and effort spent chasingpayments and on repairing and refurbishing vacanthomes is significant. Reducing this would allowlandlords to achieve a boost of millions to their bottomline each year.

We already know that warm, efficient homes with lowrunning costs bring improvements in residents’ healthand well being, lower responsive repairs andmaintenance costs, reduce levels of anti-socialbehaviour and help meet environmental targets.

To this range of benefits we can now add a significantreduction in rent arrears, voids and all the associatedcosts. We urge all social landlords to consider thislink and look forward to the debate over what canbest be done to reduce energy costs and make bestuse of existing dwellings to provide quality homes forthe nation.

The study found that:

Scenario – how GoodHomes Housing Groupincreased energyefficiency, reduced voidsand rent arrears andsaved £24m

spurred by the findings of thisreport good homes (a fictionallandlord) has improved theenergy efficiency of its 10,000homes by increasing the averagesAP rating from 65 to 75. on thebasis of this research goodhomes is likely to experience:

l reduced re-let times for voidproperties – generating an extra£40,000 in rental income eachyear;

l reduced operating costs –saving £2 million each yearfrom lower void managementcosts, re-lets and fewer repairs;

l increased income – rising by£90,000 each year due to lowerrent arrears;

l reduced operational costs –lowered by £300,000 each yearas staff spend less time chasingrent arrears and legal costs arereduced.

Taking into account thereduction in voids, rent arrearsand associated administrationcosts, a 10,000-home landlordthat improves its housing stockfrom an average sAP 65 to 75could potentially achieve a boostof almost £2.43 million to theirbottom line each year.*

over a ten year periodgood homes will be £24mbetter off.

The good homes financeteam are off to celebrate.

*Estimations from CROHM data analysissuggest that a retrofit programme on thisscale would require an investment for thisfictional landlord between £20 to 40 million.

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Why was this studyundertaken?Local authorities and social landlordsmanage over 4 million homes in theuK – almost a fifth of the total housingstock. Managing high value assets suchas properties is a complex business,especially for larger landlords. it is sometimes hard to know what the inputs andoutputs will be – how investing or cutting costs in onepart of the business could have negative, unintendedconsequences elsewhere.

When any business, including a landlord, is able to useits assets more efficiently this can make their businessplans stronger and more resilient. We wanted toexplore the impacts that, unbeknownst to landlords,higher quality and energy efficient properties mighthave on landlords' bottom lines income. Anecdotalevidence suggested there may be a link. Analysis byhastoe group, for example, revealed that propertiesretrofitted to a high energy efficiency standard had, onaverage, half the rent arrears of others.1 other studieshave pointed to a reduction in mortgage defaults bypeople that own energy efficient homes.2

This report examines the claims that there is a linkbetween energy efficiency, lost income and costsassociated with managing properties in three keyareas:

Voids: if properties are empty they still are a cost tomaintain – and they are not generating income. This isa significant issue. More than 200,000 homes acrossall tenures in england remained empty for more thansix months in 2014.3 Assuming an average monthly rentof £400 this figure represents a loss of over £500million in rental income.

Rent arrears: A sizeable problem for social landlords inthe uK. Around 85% of evictions in england in 2014-2015 were attributable to tenants being in rent arrears.4

The average total amount of outstanding arrears inorganisations is £1 million. Ten percent of housingassociations are dealing with rent arrears of £2 millionor more.5

Administration and other costs: The loss of incomefrom voids and rent arrears is only one part of thestory. staff time, legal fees, refurbishing void homes,and other costs all add up – as do other costs such asreactive repairs that are often more common in lowerquality stock.

As well as being disruptive and undesirable, otherissues such as anti-social behaviour can be an indirectcost to landlords for similar reasons.

“We are constantly looking atways to improve value formoney across the business andby reducing rent arrears andvoids we can make better use ofour assets, improve incomeflows and build more homes.”

Niki Stockton, Director of Asset Strategy,Your Housing Group

1 Hastoe Housing Association (2016). Greening Hastoe infographic. 2 UNC Center for Community Capital and Institute for Market Transformation(2013). Home Energy Efficiency and Mortgage Risks.

3 Empty Homes (2015). Empty Homes in England.4 DCLG (2016). Local authority housing statistics: year ending March 2015,England.

5 Ipsos MORI Social Research Institute (2014). The impact of welfare reforms onhousing associations.

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EPCs and SAP

An energy Performance certificate (ePc) is a home rating required by lawwhenever a home is sold or let. it takes into account the age andconstruction of a home, and includes factors that affect its energy use, forexample its size, the level of insulation, type of glazing and heatingsystems. it is intended as a comparison of energy efficiency betweenhomes to inform the purchaser (or new tenant).

A rating from g to A is given based on standard Assessment Procedure(sAP) scores on a scale of 1 to 100, where 100 is zero-carbon. The numberof occupants is calculated using a formula based on total floor area and anestimate of a typical annual energy spend is given, which may be used as acomparison.

new homes have a full assessment using sAP, but in an existing buildingmuch of the detailed information can be difficult to obtain. in these casesa reduced-data sAP (RdsAP) is used.

What do we mean by rent arrears and voids?

Rent arrears occur when people fall behind with the rent payments. Forthis report we counted a household as in arrears when the outstandingdebt exceeded one month of rent. Another common definition usedelsewhere considers that tenants are in arrears is when their debt is over£1,000.

voids are periods of non-occupancy in a property. They could be due totenants moving out or during major repairs. A lower void figure meansproperties are empty for less time, resulting in more rental income andlower expenses for landlords such as council tax.

A study by the university of north carolina found that people in energyefficient homes are 32% less likely to default on their mortgages2. Thestudy, undertaken in 2013, reviewed the loan data for 71,000 mortgages. itfound that the more energy efficient a home was, the lower default riskswere. Additionally, borrowers in energy efficient homes are 25% less likelyto prepay their mortgage.

in the uK the Mortgage Market Review requires uK mortgage lenders toconsider what repayments a customer can afford considering both theirincome and major expenditures.

Work by the uK green Building council and ucL energy instituteconsiders the extent to which mortgage lenders could estimate energycosts using data that is already readily available to them, includingproperties’ ePc rating.

The analysis shows that these estimates could significantly improve uponthose currently used in mortgage affordability calculations, potentiallyallowing banks to better manage the risks associated with their lending,while also helping prospective purchasers to better understand the realrunning costs of the property they are about to purchase.6

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6 UK-GBC & UCL Energy Institute (2015). The role of energy bill modelling inmortgage affordability calculations.

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What did we do?data were collected from 25 sociallandlords managing over half a millionhomes in england and Wales. Thelandlords ranged in size from 2,000 to50,000 homes.

The study took place over sixmonths from october 2015,assembling anonymised datafrom a range of indicatorsincluding the energyefficiency of properties, rentcharges and rent collectedfrom tenants and housingbenefit, void periods andfurther costs for dealing withthese issues.

For the voids analysis, datawas collected from June 2013to June 2015, capturing thenumber of re-lets and voiddays during the study periodas well as the sAP rating ofproperties. For rent arrears,we collected data for theperiod of november 2014 toFebruary 2015. To ensureaccuracy only properties witha confirmed sAP rating andwhich were fully occupiedduring the period werestudied. To ascertain costs

associated with processingvoids and rent arrears,participants providedadditional information.

data from over 200,000homes were received,compiled and checkedagainst the criteria, with inexcess of 2 million data pointsreceived to model andanalyse the correlation ofenergy efficiency in homeswith voids and rent arrears.

This dataset was thenaggregated and analysed inparallel with the informationprovided by participants onthe costs of administering thetwo indicators. oversight wasprovided by data scientistdr Wolfgang garn,Programme director ofBusiness Analytics at theuniversity of surrey.

Location of participant landlords (main offices)

“The total cost of ourvoids is £1 million everyyear. Reducing these costswill transform ourbusiness plan. It will makeus far more resilient.”

Noel Brosnan, Property ServicesDirector, Octavia Housing

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What did we find?Void ratesMore than 30,000 properties that were void at any point during June 2013 to June 2015 were used for theanalysis. Figure 1 shows the average number of void days during the period by sAP rating.

At the lowest end of the spectrum, properties in the e and F bands were empty for an average of up to 70 and80 days respectively over the two years – more than one tenth of the days available over the period. This is incontrast to those at the other end of the scale: energy efficient properties, such as those with a sAP rating over80 were void for 48.8 days (40% less), meaning less rental income was lost.

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Looking at the findings in moredetail, the analysis shows that thetotal number of void days are, onaverage, up to 18% larger forband F and e propertiescompared to those in band d and31% larger than those in band B.The variation within the band cand d properties was less marked,serving to underline thetransformative impact that more

ambitious programmes of retrofitand new build can have for bothresidents and landlords.

Was this profile of lower voids inmore energy efficient homesfound throughout the study?

Yes. in 90% of the landlordsinvolved in this research a cleartrend was found, showing thatenergy efficient homes presented

fewer void days during the periodof study, with a relationship thatwas broadly consistent, andespecially strong at each extreme.Figure 2 shows the findings forsome of the landlords involved.

Figure 1.Averagenumber of voiddays during thestudy period

(June 2013 –June 2015) persAP rating.

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All landlords are different andhave a wide variety of homes witha range of sAP ratings.

But what if we focused on theworst performing homes? in the Fand e bands we could potentiallyhave a reduction of 6 days per voidperiod when retrofitting up toband c and save up to £90 pervoid property. These are oftendescribed as ‘hard to treat’properties – they may be old,meaning planning consent can bean issue, or measures which areeasily applicable elsewhere are notpossible.

Voids operational costsThe direct loss of incomeassociated with voids is only onepart of the story. The study alsoinvestigated the indirect costs ofmanaging voids.

Landlords reported the followingcosts resulting from voids:

l staff time spent administeringthe re-let of the property;

l refurbishments needed in orderto market the home to newpotential residents;

l repairs to homes that aresometimes necessary due tolack of occupation;

l depreciation in the value of theproperty that sometimes resultsdue to lack of occupation.

Good Homes Housing Group increases rentalincome from voids

For this purpose let’s consider good homes, a landlord with10,000 properties all at sAP 65 that are then improved to sAP 75.

Taking into account a sector average of 7.5% of propertiesbecoming void, after improvements this landlord could see,based on the analysis above, around 3,000 fewer void days or£40,000 in extra income each year (based on a rental paymentof £400 per month).

Average number of void days per SAP rating – anonymous landlordsFigure 2. Average number of voiddays during the study period per sAPrating of four anonymous landlords. Void days during the study period

What this meansfor landlords

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Touching The voids

Average void days of the study


Analysis of participant landlordsdata showed that more energyefficient homes tended to havelower void operational costs. Asshown in Figure 3, landlords whosehousing stock had an average sAPof 66 to 68 tended to have a void

operational cost of £200 to£400 per home managed. Thiscompares to landlords with anaverage sAP of 73 to 75 with costsof £50 to £150 per homemanaged, a 60% difference.

This is significant. if having moreenergy efficiency stock reducesoperational costs, it could be amechanism for landlords to reducecosts and deliver better value formoney for their residents andstakeholders.

Landlords’ average SAP vs. operational costs of voidsFigure 3. Landlord’s average sAPof housing stock versusoperational costs of voids(excluding loss of rent).

What would this mean for our fictitious landlord?

The board of good homes housing group had a major drive to improve the energy efficiency oftheir homes. They manage, through a great deal of insulation, boilers, solar panels and otherworks to improve the average sAP of their 10,000 homes from 65 to 75. What does the above tellus about the likely impact for their operational costs?

Based on the above findings, good homes will see a reduction in administration, refurbishmentand other operational costs that could reap savings of up to £2 million per year. Repairs andrefurbishments are the most significant costs reported and go some way to explaining why thepotential savings are so high.

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“Voids cost us £4.8 million a year.Reducing these costs will makebetter use of our assets andimprove income flows. It canhelp make the organisations farmore resilient and able toachieve more.”

Mark Rodda, External Investment ManagerMetropolitan

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Further analysis of rent arrearswas carried out to determinewhether improvements in energyefficiency lead to fewer propertiesin rent arrears. Figure 5 shows theaverage months of tenant rentarrears per average sAP band ofproperties.

Poor-performing band Fproperties tend to be in arrearsfor an average of two weeks morethan higher bands (see Figure 5).While there is no major changebetween bands e and c, thosehomes in band A were in arrearsfor up to three weeks less duringthe period of the study.

Rent arrearsThere are many reasons people fallinto arrears for a short period oftime such as one-off householdexpenses or issues with benefits.in order to consistently comparethe diverse sample of propertiesacross the uK, the number ofmonths in arrears was used rather

than the total outstanding balance.This aimed to capture ‘problemproperties’ that were in arrears forsuccessive months and thus morelikely to pose issues inherent to thehome itself.

The proportion of properties inarrears, with at least one month ofrent outstanding, ranged markedlyfrom as little as 3.5% to as much as

28%. The average across theorganisations studied was 14%, afigure compounded by the factthat a third of those in arrears hadbalances in excess of £1,000outstanding. This underlines thesize of the challenge facing thesector.

Percentage of housing stock in rent arrears per landlordFigure 4. Percentage of housingstock in rent arrears.

Figure 5. Average months of rent arrears by average sAP rating.

Rent arrears by average SAP rating

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Figure 6 reveals moredetail about the extentof arrears for landlordsbased on individualproperty informationusing local linearregression analysis – astatistical technique toplot a representativeline through variables.it confirms that,

although a variationexists in the data pointseither side of the line,there is a clearrelationship.Furthermore the dropoff in arrears for upperband c properties andwithin B properties isparticularly marked.

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What this means for landlords

Figure 6. Months oftenant rent arrears persAP rating of propertiesby end-February 2015.

Less rent arrears for GoodHomes Housing Group

good homes, our fictional landlord,were keen to know what theadvantage of improved homes is forthem. how much more rent are theylikely to be collecting?

Based on good homes improvingtheir 10,000 homes from an averageof sAP 65 to sAP 75, the dataillustrates that up to £90,000 extraper year could be generated fromreduced rent arrears.

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“Since we moved to thisenergy efficient home in2011, we are now spendingless in energy bills andtherefore we are financiallybetter off to keep up with therest of the expenses.”

Mr Martin, Resident from WimbishPassivhaus from Hastoe Group.

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F E D C B


Rent arrears administration costs

As part of this study, costs associated withdealing with rent arrears were investigated.Participating landlords reported costs includingstaff time, legal and court costs, amongst others.

Figure 7 presents the operational costsassociated with rent arrears against the averagesAP of the landlords’ stock. As with voids,landlords with more energy efficient housingstock reported lower administration costs ofdealing with rent arrears.

Landlords’ average SAP vs. operational costs of rent arrearsFigure 7. Landlords’ average sAPagainst operational costs ofdealing with rent arrears.

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Will Good Homes be betteroff by improving itshousing stock?

our fictional 10,000 homelandlord improving its averagesAP from 65 to 75 could achievea reduction in costs of around35%, or more than £300,000 peryear by lower costs of staffdealing with rent arrears, courtand legal fees, amongst others.

Adding together the additionalrental income (£90,000) and thereduced administration costs,good homes could achieve animprovement of £390,000 in itsbottom line each year.

Is there a link with Housing Benefit?

housing Benefit is undergoing majorreforms. We analysed the data to take intoaccount the percentage of rent collectedfrom housing Benefit and it did not showan association with a decrease/increase ofthe levels of rent arrears.

That is not to say that changes to such asuniversal credit or Pay to stay are nothaving an effect; there have been reportsthat switching to universal credit is havingan adverse effect on rent arrears.7/8

A number of landlords and stakeholdershave suggested that it would be of realbenefit to re-run this research into rentarrears next year, when the introduction ofuniversal credit may have had a moresignificant impact on rent arrears.

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Responsive repairs

A participant landlord volunteeredto share data from a research in arelated topic – the responsiverepair costs relative to the energyefficiency of homes, as shown inFigure 9.

The trend shows that for every 10sAP point improvement there is areduction in the average cost perrepair of £90. Additional analysismay be undertaken to considerthe implications of these figures.

With over £3 billion spent last yearon responsive repairs by sociallandlords in the uK,9 this topiccould warrant further research.

The impacts of improvements to energy efficiency can sometimes be felt inunexpected places. More than 50 years after responsibility for housing wasdivorced from health, policy makers are again focusing on the link between thetwo.

not only are cold, poorly ventilated or draughty homes bad news for the peoplewho live in them: the issues they give rise to are a drain on the nhs budget. infact, Age uK has estimated the annual cost to the nhs in england due to coldhomes is £1.36 billion; and that for every 1°c drop in temperatures below 5°c,gP admissions increase by 19%.10

Figure 8. Average cost per responsive repairs against sAP rating of stock (data volunteered byone landlord).

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7 Inside Housing (2015). ‘Nine in 10 UniversalCredit tenants in arrears’.

8 Inside Housing (2016). Landlord revealsfindings of direct payment ‘pilot’.

9 Scottish Housing News (2016). UK sociallandlords spend £3bn a year on responsiverepairs.

10 Age UK (2009). The cost of cold.11 Dr Ian Wilkinson (2015). The Impacts of PoorHousing on Health: Lessons from Oldham.

12 Nottingham City Homes & Nottingham TrentUniversity (2012). Decent Homes ImpactStudy: The effects of Secure Warm ModernHomes in Nottingham.

Can the NHS make savings when we invest in energy efficiency?

The Warm homes oldham programme, a partnership between local housingproviders, oldham council and the clinical commissioning group (ccg)oldham confirmed a correlation between warmer homes and the health ofpopulation, and estimated the savings.

They found a direct link with excess winter deaths, as well as worsened healthconditions which cost the nhs significant amounts to treat. This translated toa cost-benefit ratio of 1.5:1, brought about by a reduction in demand on thehealth and social care sectors, or £245 per person lifted out of fuel povertyper year. Applying these modest savings, if each vulnerable resident ofoldham were lifted out of fuel poverty, the total estimated healthcare costsavings would be approximately £6.1 million per annum. 11

other studies, such as that by shiFT landlord nottingham city homes, lookedat the impact of their decent homes programme, starting from the startlingfact that the average life expectancy of those living in the most deprivedneighbourhoods in nottingham was ten years shorter than the wealthiest. itfound that the cost savings to the nhs from addressing serious hazards in thehome, improving respiratory health, and relieving depression from damp andmould, excess cold and fuel poverty totalled £700,000 per year. 12

£5 million inestimated savings to

NHS for improving28,000 homes in

Nottingham

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Additional impacts not covered by this report


What thisstudy means As social landlords' budgets aresqueezed by rent reductions andincreasing competition for funding,they are looking to cut costs and getmore done for less. As custodiansfor homes over generations,sometimes housing vulnerablepeople, they know that managingtheir assets well is not only good fortenants but for business too. This study set out to analyse whether the income oflandlords was impacted by the energy efficiency ofproperties. it did this by analysing a very largedataset from 25 landlords managing more than500,000 homes.

Can savings on energy bills unlock more investmentfor homes?

At present, all of the savings on energy bills deriving from energyefficiency improvements go to residents – no bad thing, of course.People who see their overall cost of living sharply decrease through lowerbills make no contribution to enable more improvements in other homes.This depresses investment that might otherwise take place, even withoutfunding from external sources. There is a strong case for the benefits ofenergy efficiency to be spread more equitably within social landlords.

consider two homes, the same size and location, one with poor energyefficiency and the other highly energy efficient. under current rules rent iscalculated regardless of energy efficiency. The cold home may have fuelbills of £1,500 per year, whereas the warm home may be as low as £400per year. Thus the resident in the warm home is better off by £1,100 a year.

sustainable homes has been calling for landlords to be able to recoup aproportion of expected savings (for instance 25%), potentially throughincreased rents, to enable more investment. The overall cost (rent plusenergy bills) of running a home will still go down, but the proceeds froma moderate increase in rents can be ring-fenced to help pay for newworks in neighbouring properties. The resident will still recoup 75% of thesavings.

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“Rent arrears have a bigimpact on our financialviability. Finding ways toimprove income by bettermanagement our rentarrears is of real benefit toour organisation”.

Paul Ciniglio, Sustainability andAsset Strategist, First Wessex

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13 Sustainable Homes (2015). National Energy Study 2. SAP in the real world: how people use energy in the home.

We have seen that properties with lower sAPratings had longer void periods than moreenergy efficient properties. Analysis ofindividual landlords supported this finding,with more than 90% of the landlordsshowing a clear trend.

voids are a significant issue. it meansforgone income but also costs such asrepairs and maintenance, needed when ahome is empty.

Rent arrears are a problem for almost allsocial landlords. This study found a linkbetween energy efficiency of homes and thenumber of months properties are in arrears.While the potential boost to income from thereduced arrears itself is not huge, it is real.

however, the administrative costs ofmanaging both void properties and rentarrears are high, and it is in this area that thereal potential savings were uncovered.upgrading from average sAP 65 to 75 for ourhypothetical 10,000 home landlord wouldentail a substantial investment – the studyfound that a combination of higher incomefrom reducing rent arrears and voids andreduced costs from managing them couldgenerate almost £2.43 million towards thebottom line each year.

Rent arrears may be caused by a host offactors too complex to capture in a studyincluding thousands of homes. Additionallyas research such as the national energystudy has shown, sAP itself may not be aperfect guide to energy performance.13

during a workshop about the results staff atsome of the landlords also urged cautionabout ensuring the quality of the retrofitworks.

The size of the sample that was interrogatedin this study is useful though. it can be saidwith confidence that the link between energyefficiency and arrears is not the product ofother ‘background’ factors.

nevertheless it is vital that thosecommissioning work, as well as the supplychain, understand potential issues that canlead to poor results. This is true not just interms of underperformance (for examplethermal bridging, where heat is lost wheninsulation is is poorly designed and installed)but also problems such as inadequateventilation which can cause health problems.is the range of technologies being deployedunderstood fully? how will residents engagewith it? is the interplay between insulation,ventilation and air quality appreciated? it isonly when measures are well commissioned,designed and installed that the benefits ofretrofitting programmes can be fully realised.


As with many activities undertakenby social landlords, warmer, morecomfortable homes can be seen asa ‘social good’ that have widerbenefits for society at large. Teasingout these benefits, whether they befrom less crime and anti-socialbehaviour or reduced hospitaladmissions,11 12 enables us toquantify their impact and build amore hard headed business casefor why energy efficiency makessense.

such an approach has never beenmore vital. With disappointingresults from the now-defunct green deal, there is nowa chasm between the levels of ambition towardscarbon-reduction commitments on display at the 2015un agreement in Paris and the actual measures inplace to achieve them. social landlords, and large-scale private landlords, are in a position to kick start amarket transformation. Between them they have alarge pipeline of projects ready to go, extensiveexperience of undertaking works to homes and, mostimportantly, can operate at scale.

There is no reason why the costs ofenergy efficiency works cannot follow asimilar downward trajectory as that whichhas been seen for solar Pv, whereswanson's law (see Figure 9) showed theprice of solar Pv dropping for everydoubling of cumulative sales. Retrofittingis more challenging, requiring moreoversight, but it is starting to follow thisprecedent: The dutch energiesprongmodel, currently being piloted by somesocial landlords in the uK, aims torefurbish a whole street of homes to thehighest standard in just ten days and atsignificantly lower cost than conventionalsystems.

But this huge potential, with landlords leading thecharge to create a mass market for energy efficiency,drive down costs and push forward innovation, will nothappen by itself. The sector needs to act together toreap the benefits – benefits that could be felt by thewider housing sector, the government and society atlarge.

80

70

60

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40

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20

10

0

“I’m saving about £50 amonth and it alsohelped with my health. Ihave various conditionsthat are affected by thecold, and since I’vebeen in this placethey’ve been muchbetter.”

Resident from Wigan and LeighHomes following a retrofit

1977 80 85 90 95 2000 05 10 13*

76.67

0.74Price, $ per watt

The Swanson effect in price of photovoltaic cells, $ per watt. Source: The Economist

*Fo

rec

ast

18

Touching The voids

Figure 9. energy efficiency works undertaken at scale can result in a reduction of costs similar to solar photovoltaic panels (Pv).


SUSTA INABLE HOMES

19

The following landlords provided tremendous amountsof support and data. Thank you:

sustainable homes would like to thank the following organisations for providingimages for this report: British gas, h+h, hastoe group, isos housing group,Liverpool Mutual homes, octavia housing, Riverside and RocKWooL.

Project leaders: Richard Lupo, John stapleton and daniel navarro, sustainable homes.

Acknowledgements This research has been supported by thefollowing organisations. Thank you:


LeAdingTodAY FoRToMoRRoW’sFuTuReour mission is for every home to encourage more sustainablelives. We work with affordable housing providers, privatedevelopers, government and others to reduce fuel povertyand improve sustainability. our award winning best practiceprogramme helps landlords of 3 million people reduce theirenvironmental impacts.

our consultancy services are designed to help you providequality homes. They include developing in-depth investmentplans to make the best use of your housing stock, monitoringthe performance of new and existing homes, flooding andoverheating risk strategies, among others.

our training assists thousands of registered providers,developers, architects, residents and others to understand:sustainable construction, energy efficiency, fuel poverty andmany other issues.

government departments and agencies such as deFRA, theenvironment Agency, homes and communities Agency andothers, commission us to write leading research.

The impact of energyefficiency on social landlordincome and business plans

© 2016 sustainable homes. All rights reserved. no part of this publicationmay be reproduced, stored in a retrieval system or transmitted in any form orby any means, including photocopying or recording, without permission fromthe copyright holders.

We take reasonable steps to check the accuracy of data presented in thisreport; however, no warranty is made as to the reliability or completeness ofthis report and it should not be relied upon as the basis for professional offinancial advice.

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