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Your guide to the proposals to increase the Minimum Energy Efficiency Standards
19 July 2021
The new Minimum Energy Performance of Buildings bill to increase the minimum energy efficiency standards for private rented properties to EPC Band C on new tenancies by 2028 will be introduced in both Houses of Parliament this week. Recent surveys show the sector is already moving in the right direction - but it could be a costly target to reach for landlords.
The government wants to raise the minimum energy efficiency standards to EPC Band C by 2025 for new tenancies in private rented homes and by 2028 for all tenancies to improve the overall energy performance of the private rented sector in England and Wales, through the Minimum Energy Performance of Buildings bill which will be introduced in the Houses of Parliament in the week commencing 19 June 2021. The consultation on the proposals ran until 8 January 2021.
UK housing stock is generally older than in the rest of Europe, according to the consultation document, and “the potential for improvement in the energy performance is considerable”. Privately rented properties, which make up 20% of the housing stock, are among the least energy efficient, “costing over £6bn in energy bills in 2018 and producing GHG emissions of around 11 megatonnes of carbon dioxide equivalent a year”. Improving the energy performance of these homes is therefore a vital part of the government’s strategy to meet its greenhouse gas emissions target of net zero by 2050.
The English Housing Survey 2019-2020 shows evidence that the sector is already moving in the right direction - the number of private rented homes in EPC bands A to C in 2019 was up 13 percent versus 2009, with 38 percent of all private rental homes falling into this category.
Building on this momentum, the government is proposing a phased introduction for the new standards in addition to increasing the maximum investment amount and introducing a "fabric first" approach to energy performance improvements, for new tenancies from 2025 and all tenancies from 2028.
Last year, it was estimated that 58 percent of UK homes would be affected by the proposed new standards and the Office of National Statistics estimates that it would cost each applicable private rented property £7,646 to move into Band C, in line with the proposals.
The core proposal is raising the minimum energy efficiency standards for privately rented properties to EPC Band C. These bands are based on the total annual cost of energy to heat and light a property, running from A to B, with properties rated A being the most energy efficient. Under the current regulations, the minimum energy efficiency rating for privately rented properties is EPC Band E. There are currently 3.2 million PRS properties in England and Wales with an EPC rating of D or below.
Using a phased introduction for new standards
The government is proposing using a phased introduction of the new standards, which means that they would apply to new tenancies from 1 April 2025 and all tenancies by 1 April 2028. This would limit disruption to landlords and tenants, allow more time for landlords to plan and save for improvements, and encourage a “whole house” approach to improvements.
Increasing the maximum investment cap
Under the current regulations, landlords of properties in EPC Band F or G are required to self-fund energy efficiency improvements, as recommended on the EPC, up to a cap of £3,500. There are some third-party funding options available. However, the consultation document notes that “improving PRS properties to EPC Band C will require greater investment”, so the government wants to increase the cap to £10,000. Government modelling indicates that, on average, most landlords would need to spend £4,700 to bring their properties up to EPC Band C.
Legislating for a “fabric first” approach
A “fabric first” approach to energy efficiency prioritises improving the fabric efficiency of a building - for example, its insulation - before making improvements to its heat and electricity generation. In addition to cost-effectiveness, a fabric first approach is used to inform recommendations for improvements listed on an EPC. This means that improvements are listed in the following order:
1. insulation 2. heating and hot water 3. windows and doors upgrades 4. electricity generation measures.
In practice, however, landlords can make the recommended improvements in any order, as long as they are complying with the recommendations. The government is considering ways in which to encourage landlords to take a fabric first approach, including whether or not this should be a requirement under the regulations.
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