The changing EPC landscape – considerations for landlords

The UK has some of the oldest, draughtiest and most poorly insulated housing stock in Europe. This means addressing poor energy efficiency is an essential part of the government’s plan to meet its net zero target set at COP26 by 2050 and, as domestic gas and electricity bills reach record levels, a way to potentially achieve significant cost savings.

The issue facing landlords is the government’s EPC ratings regulation review which is still pending. The current rules for letting a property state that the EPC rating must be a minimum of E unless a landlord had a valid exemption. Government proposals are to go further, although it is not yet clear when these will be implemented or whether the goalpost will be set at C or D for rental property. What is clear is that a change is on the horizon.

The scale of the challenge is huge – currently only a quarter of landlords’ portfolios contain properties that all meet the EPC C target. Nearly four-in-ten (38%) have properties that are all rated D or below. If proposals do go ahead, most landlords will not be able begin new tenancies until improvements are made.

According to recent research, 23% of renters are keen to see greater support from government to make energy efficient improvements to homes. However, there are very few steps a renter can implement to improve the EPC, meaning the ultimate burden of improving the energy efficiency of the property falls on the landlord.

Implementing energy improvements may seem a daunting (and expensive) prospect for many. However, despite the current regulatory uncertainty, landlords would be well advised to keep an ear to the ground and start investigating upgrades that may be required so that they are prepared for when the rules change. With tenants arguably more likely to want to rent a property where such improvements have been made and preferential rates available from some lenders to incentivise borrowers with C rated properties and above, there may be longer term benefits for landlords despite the initial outlay required.

Sources:

https://www.instituteforgovernment.org.uk/publication/tackling-uk-energy-efficiency-problem

https://themortgagelender.com/content-hub/news-articles/23-of-renters-ask-for-government-support-to-make-energy-efficiency-improvements

https://www.shawbrook.co.uk/media/5064/shawbrook-epc-2-report.pdf