New rules being introduced mean all rental properties must have an Energy Performance Certificate (EPC) rating of A to C – a status which endorses it has having the highest levels of energy efficiency.
The rules are due come into force in 2025 for new tenancies and 2028 for existing rentals
It means anyone purchasing a buy-to-let with a rating below C would need to make the necessary upgrades in order to rent it out. And the cost of these improvements could make a hefty dent in landlords’ budgets.
Indeed, the research found landlords anticipated they would need around £10k per property to carry out the works required to reach EPC Level C. This increased to over £11.5k for those with larger portfolio sizes.
Grant Hendry, director of sales at Foundation Home Loans, said: “With landlords anticipating a cost of over £10k per property in order to improve its EPC Level to C, it is perhaps not surprising they are disinclined to buy properties already below this.
“In effect, they are future-proofing their portfolios by opting only to buy C and above properties now, while they will presumably focus on those properties within their portfolio which are not currently at this level.”
How will landlords fund EPC improvements?
At present, the average landlord has 3.3 properties rated EPC D or below, the research found. This rises to 9.5 for landlords with more than 11 properties.
For those who needed to carry out work on below-Level C properties, 37% said they would do so at the minimum cost required to comply, while nearly one in five (20%) said they would carry out works to maximise the long-term value of their property.
However, a quarter said they would not carry out any works and would either sell the property or not re-let it.
Savings was the most popular way to fund improvements with 57% of those quizzed using this method. Meanwhile, 33% said they would increase the rent and 18% would access government grants or funding.
As many as 19% said they would borrow money – either by taking a further advance from their lender or taking out a loan.
Hendry said, there would be mortgage pricing incentives for properties which were already at EPC C. He added: “As we move into the future, landlords are likely to see this as a further incentive to ensure the property is above C.”
