From 2025, all newly-rented properties are expected to need an Energy Performance Certificate (EPC) rating of C or above. How prepared are landlords for the change? Rik Smith, Goodlord's Director of Tenancy Services, shares his view.
As the cost of living rises, households are analysing energy bills more than ever before. With the government committing to net zero by 2050, there’s increasing pressure to make properties more energy efficient.
Landlords are expected to have until 2025 to upgrade newly rented properties to an energy Performance Certificate (EPC) "C" standard, and until 2028 to get existing tenancies up to scratch. However, the average rating for a private rental home still sits at a "D" rating in England and Wales - and 15% of landlords are still unaware of the changes in legislation.
How do you get a good EPC rating?
Energy Performance Certificates rate how efficient your property is - with "A" being the highest and "G" the lowest. A "C" rating means a property must score 69/100 or higher.
The government hasn’t just singled out the private rental sector in this goal. All properties across England and Wales must reach a minimum "C" rating by 2035.
How costly could the necessary energy efficiency upgrades be?
Energy efficient properties will save money in the long term, and help bring down big bills. Households and businesses are currently losing out on £3 billion in savings a year by not making energy improvements to properties.
However, in the short term, significant investment is needed. The government projects that landlords will spend an average of £4,700 to upgrade a property.
Upfront costs of works are a barrier - whether it’s providing loft insulation and switching to double glazing to fitting low-energy lightbulbs or installing a new boiler.
How much will the government expect landlords to pay out?
The government has proposed a price cap of £10,000 for landlords who need to bring a property up to a "C" standard.
After that, landlords can apply for an exemption to their rating. However, it’s not yet clear what will happen to exempt properties in the long run, and whether more eco investments will be required in the future.
How difficult will it be to upgrade properties?
According to Propertymark’s analysis, 40% of privately rented properties are unlikely to meet the energy efficiency targets by 2028. However, there’s not yet been word on whether further help or support will come.
It’s likely that older homes will be hit the hardest by the changing energy efficiency reforms, with one-third of private rented buildings being built before 1919.
In contrast, new build properties and flats are far more likely to already comply with the proposed efficiency standards.
More efficient homes are often cheaper to heat and warmer to live in, reducing the likelihood of maintenance issues with frozen pipes or condensation.
Lower energy costs also means tenants will have more money in their pocket and so they will be less likely to have problems paying their rent.
How can landlords fund the improvements?
The changes to the EPC rules could impact tenants as landlords consider how to fund the improvements. Half of landlords say they will pass some of the costs to the tenant to pay for the eco-upgrades.
It’s worth noting that there are schemes, loans and grants available to help fund EPC upgrades. This includes the Boiler Upgrade Scheme, VAT relief on energy saving materials and Green Deal loans.
Zero-rate VAT on the installation of materials can cover energy-saving measures such as solar panels, insulation and heat pumps.
What will this new legislation mean for the industry?
As we wait to see whether landlords are able to meet the 2028 target, the increasing legislation may be detracting landlords from continuing to let properties.
Goodlord recently penned a letter to the UK government, which was signed by more than 300 agents, landlords, and property experts. This outlined the unsustainable pressures within the private sector and the impact this will have on landlords and tenants.
The next two years may be a time of change for the sector. There has already been an increase in people requesting recertification, which would likely rise further as we push towards 2025. It’s likely that there also may be a rush for tradespeople to install energy efficient upgrades.
A new report by former Energy Minister Chris Skidmore has also proposed legislating so that no new homes have a gas boiler from 2025 and reforming EPC ratings to create a "more accessible Net Zero Performance Certificate (NZPC) for households" - adding more potential change to the mix.
Properties with higher energy efficiency ratings are becoming increasingly desirable. In fact, nearly three-quarters of renters aged 18-34 say they check the EPC of a property before making a decision.
Making investments earlier will help to spread the cost over time and ensure the property remains attractive and desirable for tenants.
