After a couple of false starts, we finally have a confirmed - and hopefully final - deadline for landlords to upgrade the energy efficiency of their properties.
Secretary of State for Energy Security and Net Zero, Ed Miliband, has somewhat quietly announced all rental properties must achieve an Energy Performance Certificate (EPC) rating of C or higher by 2030.
So far, there’s been no word on any new financial support or grant schemes to help landlords meet the deadline, but if they are in the pipeline, the October Budget seems like the obvious time to unveil them.
Announcing the deadline is the easy part however, the real challenge will be funding the upgrades and meeting the deadline. While there are some existing energy efficiency grants available for landlords, similar to those for homeowners, it’s unlikely they will cover the full cost of retrofitting for everyone.
There’s also still a lot to explore in terms of how EPCs could fit better into the mortgage process.
Green mortgages are continually improving, but it would be great to see a more coordinated effort between the Government and mortgage lenders. To reach and maintain those C ratings, regular EPC checks will be needed - could linking these assessments to the remortgaging process be the way to go?
Right now, an EPC is valid for ten years, which seems quite a long time, especially since most homeowners and landlords make improvements during that time that could improve their rating. I wouldn’t be surprised if the ten-year period is eventually reduced, possibly to five years, with a potential for it to be tied into the mortgage process somehow.
Funding the upgrades
While there is the concern the cost of the upgrades might drive some landlords out of the market, I’m optimistic many will choose to carry out the work - even if it means partially funding it themselves.
According to a recent report from the technology firm, Reapit, upgrading all rental properties in England, Wales and Scotland to an EPC C rating will cost around £24.03 billion.
While this amounts to about £10,442 per landlord, the actual cost will vary depending on the age and energy efficiency of the properties, with some requiring a lot less work than others.
Most landlords, I expect, saw the reintroduction of the EPC deadline coming and from what we’ve seen, there hasn’t been a significant influx of properties coming to market as a result of landlords selling off, despite some claims to the contrary.
Most landlords will be able to improve an EPC rating from a D to C relatively affordably and I think will recognise this as a worthwhile investment and a way to do the right thing by their tenants. Analysis from Hamptons estimates the average tenant could save £499 per year on utility bills if their home is upgraded from an EPC D to a C rating. For tenants in EPC E-rated homes, the potential savings rise to £1,248 per year.
Need to speed things up
Having said that, upgrading the rental stock by 2030 will still be a significant challenge. If landlords continue making energy efficiency improvements at the current rate, it will take 18 years for all rental properties in England and Wales to achieve an EPC A-C rating, according to Hamptons. So, we definitely need to increase the pace.
Hamptons’ analysis also shows that to meet the 2030 target, approximately 340,000 rental homes will need to achieve at least an EPC C rating each year. This is a threefold increase from the 115,000 homes expected to make sufficient improvements in 2024.
Despite the decision of the last government to scrap the previous 2025 deadline, its analysis shows half of homes that were previously rated D went on to achieve at least a C rating upon reassessment this year. Meanwhile, 29% of homes that had an EPC E rating went on to be reassessed as having a rating of C or above.
While landlords have had time to adjust to the idea, the Government still needs to tread carefully to avoid pushing any landlords out of the market, especially if the legislation is to genuinely benefit renters. Firm incentives and financial support could be what’s needed to accelerate the pace of upgrades, along with exploring how the mortgage market can play a bigger role.
