Hundreds of thousands of buy-to-let homeowners will have to pay a “green tax” of up to £5,000 to make their properties more energy efficient.
Landlords will have to pay upfront for measures such as insulation, cavity wall filling and new boilers from 2018. Until recently they could apply for loans from the Green Deal scheme for improvements, which are then repaid by tenants who benefit from lower bills. But the new Department for Business, Energy and Industrial Strategy is proposing owners provide the money.
The move will affect 330,000 buy-to-let landlords who own homes that are less energy efficient, often from the Victorian and Edwardian eras.
Richard Jones, policy adviser at the Residential Landlords Association, said: “Unless they make funding available, landlords will be forced to pass these costs on to tenants in the form of higher rents. It could also make being a buy-to-let landlord prohibitive. They could struggle to find such a large amount of money upfront.
“Landlords have been harshly treated. This is an extra stealth tax on top of all the other measures that threaten the finances of the sector.”
From April 2018, owners must raise the energy efficiency of homes to at least Band E. More than 330,000 homes in bands F and G, the worst-insulated, need major work.
In a briefing to buy-to-let landlords the Government proposed a “hypothetical £5,000 spending cap”. It insisted most landlords will have to pay no more than £1,800 to meet the standards. However many efficiency measures cost much more.
Gas central heating can cost £3,900, cavity wall insulation £500 and loft insulation £3,000. The Department has suggested landlords can meet the costs by borrowing more.
In a presentation it states: “Data suggests around 60 per cent of privately rented properties are currently owned outright. So we assume that these landlords will have a significant amount of equity against which they might borrow.”
It claims the overall impact on rent levels will be “minimal” as relatively few homes will be hit.
There are fears buy-to-let landlords are being used by the Government as a “cash cow”, as it has announced a series of policies to “level the playing field” between people buying a home to let and those wanting one to live in.
Buy-to-let investors face a 3 per cent stamp duty surcharge and from next year they will only be able to claim tax relief on mortgage payments at the basic 20 per cent.
Philip Hammond, the new Chancellor, has signalled he will not change the approach despite the concerns of some Tory MPs.
Craig Mackinlay asked in the Commons if the surcharge is “necessary, desirable or indeed raises any additional revenue”. Mr Hammond said taxation “is there for a simple purpose: to raise revenue. I expect the taxes we put in place to achieve that.”