What Color Are You?

What colour landlord are you? Many landlords and investors are starting to turn green. No this is not a new virus but a healthy symptom of starting to care about the environment.

The Government must do a lot more to help people investing in buy to let property to make their properties more environmentally friendly.

Although a lot of property investors would like to be “green”, the cost of most energy-saving modifications takes decades to get back and the average tenant is simply unwilling to pay extra simply to help save planet earth. There are some tax breaks and grants available but they can be difficult to claim.

Richard Gard of the National Landlords Association in the UK says the environmental message is not getting through, despite the high level of debates on the subject of global warming. "Energy efficiency is not top of tenants lists of concerns," he says. "One of the really useful things the Government could do would be to educate tenants on the need to save energy. If it was market driven, investors could invest and be sure of a return."

The Governments main weapon in the quest for energy savings is the Energy Performance Certificate (EPC). Landlords will have to produce an EPC for inspection by tenants after October 2008.

But Investalist, a popular property website, believes that most tenants will ignore it unless there is a major publicity campaign. The idea is to promote EPCs in university towns, so students will be familiar with them and use them to choose energy efficient lets when they go back to their home countries, thus spreading the idea. At the moment, there is not enough knowledge out there to drive this forward.

Tenants are just not interested in their impact on carbon emissions. At the Greenwich Millennium Village, for example, the design was advertised as a new gold standard of environmental excellence, but prospective tenants know absolutely nothing about it. None of them know about the eco-friendly design until they ask about the heating bills. Tenants are pleased with the low bills, but they come to the Greenwich Millennium Village because it is close to Canary Wharf and it represents good value for money, not to help the environment.

Until we overcome tenant ignorance, the Government will have to offer landlords better financial incentives to implement important energy savings, says buy-to-let investor David Lawrenson.

There are some tax incentives on offer from the government, such as the Landlords Energy Savings Allowance, which brings tax relief of £1,500 for each property if investors install things like lagging and roof insulation. But the governments need to offer a lot more before it is worthwhile doing major work.

The gas and electricity companies offer a lot heavily subsidised deals on insulation, draft excluders, wind turbines and solar power, but no financial compensation is available for loss of rent for investors and landlords while the work is being done.

In the long term, the Government has to take action to force property owners and that will have to include investors and landlords, to improve energy performance.

Environmental standards are driven by laws and until we have mandatory standards, the market will not change. The position will change dramatically over the next five years, fuelled by government aims for zero carbon housing by 2016.

New homes are only a very small part of this problem. Existing houses must be upgraded as a matter of urgency. New build is only 2% of the problem. We need to tackle the other 98%. But the good news is that people are beginning to recognise the need to take action. A tipping point has been reached in public perception.