Our research shows that heat pump adoption in the private rental sector is constrained by a combination of financial, informational, and trust-related barriers, compounded by regulatory uncertainty. In our conversations, landlords we interviewed pointed to the following problems as key barriers to heat pump uptake in the PRS.

• Heat pumps’ high upfront costs and slow return on investment in a context of diminishing returns and tightening regulation for letting property.
• Scepticism towards the technology, with concerns including efficiency, aesthetics, disruption, and availability of a qualified workforce.
• Scepticism towards government policy, impacted by previous shifts in decarbonisation policies and deadlines, discouraging investment.
• Impact on tenants and property management, both at the point of installation and beyond.

The barriers listed here, such as high heat pump costs, do not only affect landlords, but are felt acutely in the private rental sector, where they are coupled with a lack of incentives and concerns around compliance. Our research suggests that addressing these challenges might support heat pump uptake in the PRS. Approaches should focus on making heat pumps the norm by easing their adoption through lowered costs; supporting landlords wanting to invest in their rental property with clear information and points of redress; and protecting tenants from shouldering the financial burden of decarbonisation.

A lack of regulatory incentives has created poor conditions for heat pump uptake in the PRS. Current government responses in Scotland, England and Wales are aiming to address this situation. The Renters’ Rights Bill and changes to EPC and MEES regulations will change the status quo. At the time of writing, we expect DESNZ’s Warm Homes Plan to deliver proposals to support decarbonisation in the PRS. However, the UK and Scottish governments must ensure that the cost of transitioning to clean heat is not solely borne by tenants.

High upfront costs, a lack of clarity about heat pump costs, low levels of information about funding and low trust in the technology are likely to have negatively affected uptake in the PRS, as they have in the owner-occupied sector. Policies to remedy these barriers would have a positive impact on all homeowners regardless of tenure.

Landlords face a unique combination of lack of incentives (such as lower bills) and regulatory constraints that set them apart from other homeowners when it comes to decarbonisation. As a result, landlords ready to upgrade their rental properties should be incentivised to do so, in particular by rebalancing the life costs of a heat pump to bring them down to parity with, or below, those of a boiler, and through exploring options that would avoid shifting the cost of decarbonisation onto tenants. Landlords could also benefit from increasing awareness of innovative business models (such as hire purchase or group purchases) that could decrease the upfront cost of heat pumps. From our interviews, it was also apparent that current regulatory thresholds and targets have likely not been sufficient to encourage uptake so far, and have encouraged measures such as insulation over low-carbon heating technologies. However, previous U-turns in policy direction on sustainability have hampered change, created uncertainty and a lack of trust among landlords tasked with regulatory compliance, even as changes in tax legislation and a rise in interest rates have made being a landlord less lucrative. Clarity of messaging and signposting, an easy customer journey and guarantees, with clear avenues for redress, will help encourage landlords willing to invest in their rental properties by creating trust and increasing momentum – particularly those who, like some of our interviewees, may have been discouraged by poor experiences with government schemes in the past. Policies should aim to address decarbonisation and fuel poverty as a priority, by rebalancing the costs of electricity in order to avoid shifting the burden of cost onto tenants.

This research has highlighted a potential role for letting agents: by supporting their customers with regulatory compliance, helping them find suppliers and coordinating repair and maintenance to rental properties, letting agents already have experience with providing services that may prove invaluable for a mass decarbonisation of the private rental sector. While the findings of this report are limited to a small group of landlords, they have the potential to be generalisable to a wider cohort, and we will aim to validate them in a further stage, testing the potential for letting agents to support decarbonisation.

Finally, while this research does not purport to deliver detailed recommendations, the below measures would go some way towards lessening some of the challenges we have listed.

Recommendations

• The UK and Scottish governments should maintain their current ambition for EPC C to become the legal minimum for homes in the private rental sector.
• The Scottish government should change the eligibility criteria for the Home Energy Scotland grant so that landlords can access it, as they can with BUS in England and Wales.

Avenues for further research

• Explore the potential of business models, such as leasing or time of use/heat as a service tariffs, that could reduce the upfront costs of heat pumps and provide reassurance about ongoing maintenance. Such models could increase the likelihood of uptake, particularly among professionalised and HMO landlords, while providing security of cost to tenants.
• Explore the potential of ‘heat pump ready’ services for landlords looking to sell their properties in a shorter period of time.
• Explore the role of letting agents as regulatory support for landlords, and in particular as part of a coordinated shift to low-carbon heating for private rented properties.
• Exploring tenants’ perceptions of low-carbon heating systems and/or understanding their experiences of retrofit.