5. Competition Assessment
The assessment of the impact on the regulations on competition set out below focuses on the impact on landlords. In addition, the regulations may create more demand for assessors and installers. Since the impact on these suppliers will be positive, no adverse impact on competition in the installer/assessor market is anticipated. On the contrary, as discussed in section 1.4.4, regulation could give suppliers greater confidence that there will be demand for their services, and this could support investment in these markets, including by new entrants, thus increasing competition.
The proposed regulations will set a minimum standard of energy efficiency in the sector for all landlords in the private rented sector. While the main impact of the regulations will fall on the sub-set of dwellings which are below the required level, this will only be to bring them more in line with the energy efficiency of other properties in the sector.
For each dwelling in their portfolio which falls below the required standard, the landlord will be liable for the costs relating to an assessment report and, potentially, a post-upgrade EPC for that dwelling, as well as the costs of upgrading it. These costs vary in proportion with the number of dwellings in the landlord's portfolio. Since they are not fixed costs which can be spread over a number of dwellings, they do not give larger landlords an advantage. Thus, the proposed form of regulation will not penalise smaller landlords relative to larger landlords.
Larger landlords who are upgrading a portfolio of dwellings may have some advantages due to economies of scale, such as being to negotiate a better price per unit from an assessor/installer. However, to the extent that such economies of scale exist, they are part of the normal operation of the market and are not in themselves the result of the proposed regulations.
The regulations may discourage some "accidental landlords", e.g. people who temporarily rent out their former home before selling it, if they see minimum standards as too onerous. However, it is important that any prospective landlord is prepared to meet the professional standards required by tenants. Furthermore, if, following the consultation on the owner-occupied sector which will take place from Winter 2017/18, minimum energy efficiency standards are applied to this sector as well, there will be no or less of a differential between the private rented and the owner-occupied sectors due to energy efficiency regulations.
Minimum standards will make things fairer, ensuring that all tenants in the private rented sector are guaranteed a minimum level of energy efficiency. By giving prospective tenants greater confidence in the quality of the offer provided by the private rented sector, the regulations may help make the sector more attractive, potentially boosting demand and creating opportunities for good landlords to enter the sector.
The questions required by the competition assessment are as follows:
- Will the measure directly or indirectly limit the number or range of suppliers?
- Will the measure limit the ability of suppliers to compete?
- Will the measure limit suppliers' incentives to compete vigorously?
- Will the measure limit the choices and information available to consumers?
For the reasons set out above, our view is that the answer to all of these questions is "no".
Email: Denise Buchanan