A lack of awareness of the requirements around energy performance certificates (EPCs) and forthcoming regulation may hamper the government’s efforts to improve the energy efficiency of properties within the Private Rented Sector, according to The Mortgage Works’ latest buy-to-let report.
According to poll of 1,000 UK landlords1, nearly two thirds (62%) of landlords are unaware that having an EPC is a legal requirement. When it comes to the proposed requirements and what the energy efficiency requirement will be by 2030, only one in three (33%) knew it was a C rating. Nearly three quarters (73%) of landlords also don’t know the proposed dates when the new regulation comes into force – leaving many at risk of taking no action with five years to go before the new rules take force for all rental properties in England and Wales.
Help is needed:
The research indicates landlords would value help in understanding the new regulations and how to finance the changes in a cost-effective way. More than half (55%)2 said that having help to identify the most cost-effective improvements for their property would be valuable, while 53 per cent2 say would benefit from help to understand the new energy efficiency requirements. Half (50%)2 of landlords would benefit from signposting to grants and financing options to pay for the improvements needed.
What will landlords do?
While 45 per cent of landlords3 with a property rated D or lower aim to bring some or all of their properties up to an EPC-C rating by the government’s deadline, more than a quarter of all landlords (28%) plan to sell.
More than half (54%) of landlords3 looking to improve their property are waiting until the end of the government consultation or when the minimum energy efficiency requirements become law before taking action. It’s likely mass inaction will exacerbate the reliance on trades and materials should government force a short implementation period.
Finances:
Nearly two thirds (63%) of landlords3 are unsure of how much money they’ll need to spend to bring their properties up to an EPC-C rating. More than one in five (21%) believe they will need to spend up to £6,632 on average, depending on the property’s current value.
Paying for any works are likely to have a financial impact on tenants with over a third (37%) landlords3 indicating they will need to raise rents to cover the cost, either before the work is complete, or when it is started. However, landlords3 are also willing to fund works with money they have in their current accounts and savings (38%), while 17 per cent would apply for a further advance.
Tenant disruption:
Undertaking the work needed is also likely to cause disruption for tenants to various degrees. However, nearly two in five (39%) landlords3 are mindful of the impact that energy efficiency improvements will have on tenants, highlighting they’ll offer a temporary rent reduction as compensation for any disruption or inconvenience.
The same number of landlords3 (39%) want to navigate property upgrades in phases around tenants, an approach dependent upon an implementation period that allows a lead time to schedule works around tenancies ending and starting.
17%3 will need to evict tenants to complete the works, presumably where the works will be so intrusive it would be unsafe to remain. There has been significant conversation on the limited rights a landlord has to evict tenants once Section 21 is abolished. Therefore, it may be that landlords are unaware refurbishment will remain as grounds to evict tenants.
Three key areas for the policy reform to be successful:
The Mortgage Works has consistently called for three areas to be addressed to ensure that the government’s ambitions are realised and landlords are supported in doing so. These include:
- To support effective implementation, The Mortgage Works would like more time factored in between completion of EPC reform and new Minimum Energy Efficiency Standards regulations coming into force.
- A phased implementation which tackles the least energy efficient properties first and allows capacity in the retrofit sector to build over time. The initial requirement should be for EPC E properties to be upgraded to EPC D by 2030. Requirements could then shift to EPC D properties with the aim of all rental homes meeting the EPC C target by 2033 or beyond.
- The Mortgage Works continues to remain opposed to a single national cost cap setting the maximum amount landlords are required to spend on improvements and believe that a cap of £15,000 is too high. The cost cap should be reconsidered and replaced with an approach which recognises the complexity of the diverse nature of the UK housing stock and owners’ circumstances.
Dan Clinton, Head of Buy to Let at The Mortgage Works, comments, “Changes to Minimum Energy Efficiency Standards have been under discussion for some time but our research shows limited landlord awareness with some looking to exit the market. Policymakers should recognise the vital role landlords play in supporting economic growth through labour mobility and for providing homes to low-income households. Improving the energy efficiency of private rented homes is important but the significant logistical and financial challenges of upgrading 2.5 million properties must be acknowledged. Striking the right balance between environmental progress and housing stability is crucial. To safeguard continued investment and protect tenants from higher rents or reduced supply, landlords need clear guidance, adequate support, and sufficient time to make their properties greener.”
Read The Mortgage Works’ full report here.
