The Energy Price Cap is Rising by 54% on 1st April. How Will This Affect YOU as a Landlord?

Talitha Burgess, Managing Director Clarity Property Management talks about an issue that’s just about to affect landlords and tenants alike. In fact, all of us. If you rent out your property, what’s the best thing to do RIGHT NOW

We’re just about to experience what can only be described as an eye-wateringly steep increase in our gas and electricity bills. On average, energy costs are rising by £693 per year for an estimated 22 million people, with effect from early April.

Coming on top of the economic uncertainty caused by the pandemic, as well as future tax rises, and all the other issues that property portfolio owners have experienced, I guess I’m right in assuming that for you as a landlord, this news is yet another obstacle to get over, or to try to get around.  

And, to be fair, for practically everyone.

So, to save you trawling around the internet for advice, I thought it would be useful to put together an at-a-glance guide to help you understand exactly what’s going on, how it’s likely to affect you and those who live in your property – and, if possible, to offer some timely advice on how best to manage it.

Firstly, what is the energy price cap?

We mean the somewhat ironically named energy price cap, don’t we?

Well, it’s this: the energy price cap was introduced in 2019 by the energy regulator Ofgem.

It’s a way to make sure that customers who don’t shop around to switch energy providers or change tariffs can get a fair deal. In brief, the cap is just that: a limit on the amount that energy suppliers can charge for each unit of gas and electricity that a household uses, along with a maximum daily standing charge.

This applies to standard and default tariffs – but not to fixed ones.

The energy price cap gets set every six months, in April and October.

Why is the price cap going up?

Without going into too much detail, or touching on controversy, wholesale costs of natural gas have risen. A lot. Supplies from Russia, Norway and the North Sea are low, too. As gas prices tend to feed into electricity costs, the latter have also escalated.

Many smaller providers have already disappeared into the ether, simply unable to have hedged or bulk-bought energy in advance

Where Are We Now?

Not to put too fine a point on it, you as an individual, and of course your tenants will be out of pocket to the tune of £58 per month on average.

And, prices could stay high for at least 18 months, but nobody is quite sure about that right now.

For You as a Landlord

If bills are included in the rent you charge, especially if you have a large portfolio of properties, you will need to consider carefully how best to include all these new costs. As a legitimate landlord, we recognise that you’ll always want to do the right thing by your tenants, so do get in touch with us if you need some advice. And of course, as is the case with almost everything in life, communication is key.

Now could be an anxious time for them, so do keep your tenants in the loop as much as you can.

Also, you should consider:

Insulation. Keeping the heat in keeps costs down. There are government grants to help you do this. Google is your friend here.

Installing a smart meter. If you’ve not yet done so, smart meters are a free-of-charge government initiative that enables energy users to pay precisely and exactly for what they use – and no more. Plus, it saves them having to submit meter readings.

Paperless energy bills, and direct debit payments can help control bills at little, so do offer some landlord-wise words of advice if you can.

A bit more support

Talking of advice, there will be government help for those who may struggle financially. There’s a £200 discount on energy bills for all households with effect from October 2022; however, don’t get too excited: it’s a loan that needs to be re-paid in instalments.

Plus, if your tenants live in a property in council tax bands A-D, there will be a £150 council tax rebate this coming April. This reduction isn’t a loan, which is good news.

Should renters be in receipt of certain benefits (for example, JSA, Universal Credit, and Income Support), they could be in line for a Cold Weather Payment of £25 per day over a 7-day period, subject to certain recorded temperatures from 1^st November through to 31^st March. Far from me pouring cold water on this idea, do be aware that this may not necessarily be the silver bullet that’s required: we live in Sussex, which, whilst not exactly the Riviera, tends to be warmer than say, the wilds of Scotland.

Above all, encourage your tenants to talk to their energy provider if they run into any problems. Utilities businesses are obliged to treat their customers fairly. They should be able to offer a workable re-payment plan if they run into difficulties. But, they’re not mind readers. Running away from a scary bill will only make things worse, of course.

What’s the Best Tariff to Be On?

We’re not energy consultants, so we can’t offer you advice on an official basis. Nor, I’m sure, would you expect us to.

As it stands currently, these price increases will apply only to those on variable, default or out-of-contract tariffs – which are all more or less the same thing. Customers on fixed tariffs (that is, with set contracts) will probably not be affected. I say probably, as there are conflicting opinions as to how best to move forward. 

Right now, if your energy supplier has gone bust and you’re moved to a fixed term tariff with a new company, committing to a fixed term could lock you in to hundreds of pounds more a year than you were expecting.

In summary, I hope that these tips will prove useful. It seems like life just hasn’t gone back to “normal” yet, and unless the wholesale market cools down in line with the encroaching colder months as we go into autumn, the cost of living could go up before it slowly descends to pre-pandemic levels.

Big collective sigh.

As ever, Clarity Property Management is here to offer landlords the advice and guidance they need, so don’t hesitate to get in touch for some bright-spark, energetic advice, if you see what we mean.