Energy efficiency should be factored into the social rent formula, a new report has concluded.

The Housing Forum, a cross-sector organisation that represents the entire housing supply chain, says that though social housing is currently the most energy efficient tenure of housing in England, with 60% of properties meeting an EPC rating of C or above, more needs to be done, given the recent rise in energy costs and urgent need to decarbonise our housing.

Tenants in an EPC D-rated property face bills which may be twice as high as those in an EPC-B rated property, with few options to improve the energy efficiency of their own homes. 

The Housing Forum’s report outlines how rents could be rebalanced rents so that the total cost of rent and bills is evened out for tenants within four years.

The report claims that this would reduce rents for tenants with higher energy bills, with those in more energy efficient properties paying a bit more rent in recompense for lower energy bills, providing a fairer deal for tenants. 

Factoring in energy efficiency into the social rent formula would also provide an incentive for social landlords to upgrade their properties, generating capacity for private finance to help fund some of the upgrades. 

Jamie Ratcliffe, Chief Communities and Sustainability Officer at Housing Forum member, Sovereign Network Group, said: “The UK has the draughtiest homes in Western Europe. This combined with the highest energy costs exposes the country to authoritarian regimes and undermines our national security. Instead of effectively running the bath with the plug out urgent action to make homes warmer, healthier and easier to heat is needed. At present the complicated formulas for social rents take no account of the cost to heat a home and they should. A “warm rent” would increase the funding options available to landlords and be fairer to tenants.” 

Ian McDermott, Chief Executive of Housing Forum member, Peabody, said: “I’ve been an advocate for “warm rents” for many years and welcome this policy paper from the Housing Forum. It’s a good exploration of the issues. At Peabody we support the principle of taking thermal comfort and energy efficiency into account in the future social rent formula. This could incentivise energy efficiency work and retrofit investment, help reduce residents’ energy bills and support a fairer and more equitable approach to rent setting.

“We are concerned about additional complexity however, and any changes would need to enshrine affordability in rents and service charges whilst safeguarding landlords’ ability to invest for the long-term. We look forward to being part of the discussion going forward.”