Regulations requiring all rental properties to have an Energy Performance Certificate (EPC) rating of C or above for new tenancies come into force in 2025, before extending to include all tenancies by 2028.
This has significant financial ramifications for buy-to-let landlords, who are now required to carry out renovations to ensure their properties meet the legal requirements by the set deadline or face the prospect of not being able to take on new tenants.
The new rules, which are part of the government’s long-term plans to reach its ‘net zero’ carbon emissions target by 2050, are likely to have a significant impact on both existing and future landlords as well as the UK’s housing supply. It may lead to some landlords selling or avoiding purchasing properties with low EPC ratings or buying only those rated C and above in order to avoid carrying out improvement works.
Tenants are also likely to feel the brunt of the changes as some landlords look to finance the cost of EPC improvements by increasing rents. Meanwhile, the supply of rental options could dwindle as older properties, often used in flat conversions, fall out of favour due to the need to improve them.
Despite these impending changes, research conducted by Shawbrook Bank has found that one in seven (15%) private landlords admit they are unaware of the proposed EPC changes and 2025 deadline.
Another poll, conducted by The Mortgage Works, found 35% of landlords did not believe they would be able to bring their properties up to the required EPC standard by the given deadline.
This is concerning. Landlords cannot afford to ignore the drive to improve the quality and energy efficiency of current housing stock, especially as more than a third (36%) of current properties in the private rented sector were built before 1940, making them more likely to have a poor EPC rating.
In fact, the research showed that 23% of landlords own properties rated D or below for energy efficiency, which would make them unrentable post 2028 if works are not carried out.
Writing property off is not an option when demand for housing stock is already in short supply. According to the Ministry of Housing, Communities & Local Government, 58% of all existing domestic properties were assessed D or worse between January and March 2021. This equates to 14.3 million out of 24.7 million properties in England alone, which gives some indication of the scale of the issue.
Funding options
For those landlords concerned about spending all their annual rental income and more on home improvements, if they are also coming to the end of their mortgage term it could be worth consolidating their mortgage debt. This may help to raise the capital needed to finance any renovation works.
It may also help to prevent them from being left with property they cannot rent, sell or improve should their lender pull back from lending on properties with a poor EPC rating closer to the 2025 deadline.
In addition, it may also help to cover the rising cost of labour and materials as well as any future Bank of England base rate rises.
By seeking advice and using a broker to work out what the changes mean, landlords can be assured they find a practical solution to accessing the finance they need to carry out the required work and ensure both they and the buy-to-let market continue to thrive.
Hiten Ganatra is MD of Visionary Finance
i have just given a good tennant with two children her notice .
My property is 100 year old stone terrace , typical
of property in Burnley lance.
It will cost £15,000 to insulate .
my Tennant is in low income and cannot
pay more rent.
my mortgage term is coming to an end .
Therefore i have to sell the rental property
, which will remove it from the rental property stock .
Several property landlords i know , are intending to do the same soon.
one friend is going to sell 25 terrace houses in Burnley ; after giving tenants notice .
To achieve new ECP figures it is impractical on the victorian stone built terrace houses .
Apart from new insulation boards on the inside of external walls ,
they need insulation covering the stonework on the outside walls ! front and back ,
this spoiling the quality facing stone ,
by covering it with insulation boards and rendering it .
The house becomes an eyesore.
Where will the evicted tenants move to.
Rents are being forced upwards and becoming too expensive for tennants in a poor area .
Maybe traditional stone built ex cotton mill workers properties without cavity walls in the north of England and Scotland should be exempt from the full amount of these measures.
maybe only insulating the inside walls of the properties giving a smaller increase in insulation ,would be more practical .
Currently these new ECP targets are making renting victorian terrace property unviable in the less affluent north of England .
These are proposals not law , stop stating the changes as fact .