Why energy-efficiency may be the next big draw for tenants

The Government must do more to help buy-to-let investors make their properties more environmentally friendly, landlords groups warn.

Although many property investors would like to go green, the cost of most energy-saving modifications takes decades to recoup and the average tenant is unwilling to pay extra simply to help save the planet. Some tax breaks and grants are available but they can be difficult to claim.

Richard Gard of the National Landlords' Association says the environmental message is not getting through, despite the high level of debate on global warming. "Energy efficiency is not high on tenants' lists of concerns," he says. "One of the great things the Government could do would be to educate tenants on the need to save energy. If it was market driven, our members could invest in response."

The Government's main weapon in the drive for energy savings is the Energy Performance Certificate (EPC), which will be a part of the Home Information Pack for house sales later this year. Landlords will have to produce an EPC for inspection by tenants after October 2008.

But Gard believes that most tenants will take no notice of 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 return home, thus spreading the idea," he says. "At the moment, there is not enough knowledge out there to drive it."

Tenants are depressingly uninterested in their impact on carbon emissions. At the Greenwich Millennium Village, for example, the design was trumpeted as a new gold standard of environmental excellence, but prospective tenants know nothing about it, says Ricky Lam, letting agent at the local office of Keiller Collins.

"None of them know about the eco-friendly design until they ask about the heating bills, when I explain about it," he says. "Tenants are happy about the low bills, but they come to the Greenwich Millennium Village because it is close to Canary Wharf and it is good value for money, not to help the environment."

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

"There are some tax incentives, such as the Landlord's Energy Savings Allowance, which brings tax relief of £1,500 per property if you install things like lagging and roof insulation," he says, "But they need to offer a lot more before it is worthwhile doing major work."

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

In the long term, the Government has to take action to force property owners, including landlords, to improve energy performance, says Nick Thompson of Cole Thompson Anders, who designed the highly regarded Integer eco-house at the Buildings Research Establishment in Watford.

"Environmental standards are driven by legislation, and until we have mandatory standards, the market will not shift," he says. "I suspect the average tenant would be reluctant to pay more but 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 the problem. The existing housing stock must be upgraded as a matter of urgency. "New build is only 2 per cent of the problem," says Thompson. "We need to tackle the other 98 per cent." But the good news is that people are beginning to recognise the need for action. "A tipping point has been reached in public perception," he says.

Make the switch

* Use the Energy Saving Trust's automatic search for grants and offers at www.energysavingtrust.co.uk/myhome/gid/

* Install energy-saving light bulbs

* Look for the Energy Saving Recommended label on domestic appliances

* Insulate loft/wall cavity

* Replace the boiler with a modern condensing model