Only those living under a rock will have missed the recent rise in energy prices. The inflated prices have largely been down to the war in Ukraine. The conflict has caused a shortage in natural gas, affecting our energy prices.

Wholesale gas prices are now a whopping 20 times higher than they were two years ago. And as of 1 April 2022, Ofgem increased the price cap to ensure that energy costs reflected the increase.

Whilst our energy bills have rocketed, landlords are also seeing rising costs of property maintenance and repairs, making the cost of running a rental property increasingly expensive. For HMO landlords, who typically include bills in their rental agreements, the cost of energy is now a cause for concern.

Of course, we want our tenants to be comfortable and enjoy their time in their homes. In fact, keeping homes heated can help prevent the costly issue of condensation damp. But finding that middle ground of reasonable usage can be tricky. Inevitably, some tenants will not be as conservative with their energy usage when they are not directly responsible for the bills.

Ways landlords can mitigate increasing energy costs

Switch suppliers

There are several utilities comparison websites out there that will do the hard work for you. Simply sign up to get notified when you could switch to a cheaper tariff.

The right tool for the job

Ensure your tenants have the right tools to measure their energy usage.

You can install basic thermostats in the hallway and on radiators.

Or upgrade to sophisticated thermostat systems such as Hive & Nest, and Smart Meters. These sophisticated systems can help tenants to form good habits by seeing what devices use the most energy. They also allow tenants to alter heating schedules from their phone and thus making it much easier to be efficient.

Insulate wherever possible

If you haven’t done it yet, now is the time to insulate your rental properties! You can install insulation under the floor, in the walls, in the loft or roof. You can also draft proof the windows and external doors. Water tanks and pipes can be insulated, including the backs of radiators too.

Share best practice

To minimise the impact of the price increase, tenants should think about what they can do to be energy efficient. You can share best practice tips such as turning devices off at the plug rather than standby, running dishwashers and washing machines at night if they are on a cheaper-by-night tariff, and setting the thermostat to a reasonable temperature.

Transferring responsibility

Set expectations on energy use, or transfer responsibility by putting a fair usage cap in tenancy agreements. You could even change meters to top-up and simply give tenants an amount of credit to spend per month.

Or scrap all-inclusive

Alternatively, you can exclude gas/electric from the rent. This way, tenants pay for what they use, and you don’t have to concern yourself with picking up large bills. However, you would have to factor in room-by-room letting issues. Overall, we would not recommend this option for room-by-room HMOs as it can cause internal contention if someone is deemed to use more energy than others.

How will energy prices affect the rental market generally?

There has already been an increase in the number of tenants requiring guarantors as affordability ratios shift in referencing. For those who do not have energy bills wrapped into their monthly rent, the energy crisis will add to each household's monthly bill. The cost of living is expected to rise due to these and other reasons.

When asked why their cost of living had increased, 66% of respondents said it was due to higher gas or electricity bills. According to the January Opinions and Lifestyle Survey, this could mean the difference between tenants paying their rent on time or going into arrears.

This problem is unlikely to go away any time soon. According to reports, the energy crisis may not be resolved for three years, and up to six million homes may find themselves in fuel poverty during that time. Which is why landlords may have to take greater pains to help tenants shield themselves from the rising cost of energy. We hope the advice in this blog will help landlords to do just that.

Property Blog