Property News

Landlords Demand Government Support For New EPC Targets

Landlords Demand Government Support For New EPC Targets

Almost a third of landlords want government help to reach new EPC targets, according to research from Shawbrook.

Some 29% of landlords said that the targets set by the new Labour government would only be achievable with support. With the costs of any improvements the key concern, a further 16% said they would struggle to afford the costs, and a quarter ( 25%) said they plan to sell the properties that would require upgrades.

However, some landlords have already started to make investments in their properties prior to the new regulations being introduced.

Over a fifth (21%) of landlords said they have made some changes to their properties to increase their EPC rating to C ahead of the previous government scrapping the targets last year. 22% said they have undertaken upgrades and their properties are now rated C or above.

Professional portfolio landlords were more likely to have already made upgrades to their properties. A quarter of landlords with four or more properties within their portfolio had made changes prior to the targets being scrapped; in comparison, 17% of landlords with 1-3 properties said the same.

Previous research by Shawbrook highlighted that the majority of landlords had been on the path to improve their properties prior to the government changing tack.

More than half (54%) of landlords had made at least some efficiency improvements in the first half of 2022, prompted by growing demand from their tenants amid rising energy costs. However, with the 2030 target never confirmed, and eventually scrapped by the previous government, some landlords held off or paused investment plans for their properties, and therefore still have steps to take to reach a C rating.

Overall, new EPC regulations have sparked significant worry amongst landlords, with over three quarters (78%) saying they are a concern and a quarter of those feeling very concerned.

Emma Cox, managing director of Real Estate at Shawbrook, commented “our experience has shown that landlords overall are motivated to improve their properties. In 2022 we saw many take steps to do so both in response to demand from their tenants, and the-then targets from the government. However, when these targets came into question, at a time of significant economic headwinds, many chose to hold off on costly renovation projects. With these targets back in place, landlords now must play catch-up.

It’s encouraging to have greater clarity from the government which will allow landlords to put in plans in the run-up to 2030, but with just over five years left to comply it’s clear that landlords will need support to get there, both from the government and the industry. When you consider the housing stock in the UK, much of which was built prior to 1950, the extent of the challenge is clear. According to the English Housing Survey, 12% of the private rented sector is currently rated E to G. It’s also worth acknowledging that the cost of improvements is consistent nationwide, but the impact is disproportionately higher for landlords with lower-value properties, making a £10k investment far more burdensome in the North than in London, for example.

Having a quality, energy-efficient, professional private rented sector is critical, particularly at a time when home-ownership and access to affordable housing remains challenging. But this must be achieved with the support from government and industry.”

 

Energy Performance Certificate (EPC) regulations have become a key concern for landlords and letting agents. But are they forcing landlords out of the market?

Labour has proposed a significant shake-up to the rental sector. By 2030, all privately rented properties must meet a minimum EPC rating of band C. According to the Labour government, these regulations aim to take more than a million renters out of fuel poverty, ensuring that additional costs are not passed onto the renters. Landlords who fail to meet this requirement won’t be able to rent out their properties.

These regulations risk encouraging landlords to leave the sector as expensive upgrades are required to meet these new standards. According to Goodlord’s 7th annual State of the Lettings Industry report, 52% of landlords stated that increasing their property standards would be a reason to leave the sector.

Here is everything letting agents need to know about future regulations and impacts on the sector.

  • The impact of EPCs on the private rental sector
  • How much would it cost to upgrade a property?
  • What will change under a Labour Government
  • What is the future of EPC regulations?

The impact of EPCs on the private rental sector

​​EPC regulations are creating growing concern within the private rental sector. The upcoming changes to the energy efficiency standards required for rental properties are expected to significantly impact both supply and demand. According to Goodlord’s State of the Lettings Industry report, many landlords unwilling to upgrade their properties may choose to sell up instead.

Only 29.5% of landlords report that more than half of their properties meet EPC band C. However, if they do not make the necessary upgrades, they won’t be able to rent out their properties after the 2030 deadline.

These concerns are echoed across the industry, with 61.1% of landlords and 57.7% of letting agents agreeing that higher EPC standards will negatively affect the rental market.

Want to explore the data behind EPC regulations? Download the report now

How much would it cost to upgrade a property?

Letting agents are increasingly worried about the financial impact of these upgrades. Nearly a fifth of landlords with non-compliant properties said they’re unwilling to invest in the required improvements, as stated in Goodlord’s State of the Lettings Industry report.

Research by Zero Deposit suggests that around 2.68 million UK homes need upgrades, which cost an average of £9,000 per property.

However, there’s a clear discrepancy between what’s needed and what landlords are willing to invest. According to Goodlord’s State of the Lettings Industry report, most landlords are only willing to spend an average of £2,400 to meet the EPC band C requirement.

Only 4% of landlords surveyed are prepared to invest over £10,000.

This mismatch raises serious questions. If landlords are unwilling or unable to invest in the necessary upgrades, many may leave the market sector rather than face the costs.

Letting agents must be aware of this growing issue, as it could lead to a shrinking rental stock, impacting tenants and the industry.

What are Labour promising for EPC regulations?

Labour’s response to the EPC regulations is the Warm Homes Plan, introduced during their September 2024 conference. As Energy Secretary Ed Miliband outlined, the plan promises "warmer homes, lower bills, and lifting over one million people out of fuel poverty."

The plan includes a Warm Homes: Local Grant to help private landlords fund EPC upgrades. This grant will begin delivery in 2025 to English private landlords who have tenants on low incomes or properties rated EPC D to G. Landlords must also agree to the following conditions:

Agree to have their details stored on a central database.
Partake in surveys or evaluations conducted by the Department for Energy Security and Net Zero.
Confirm that any grant assistance will not exceed the cap of £315,000 over three years, as per the Minimum Financial Assistance threshold.
A limited amount of funding is available for local authorities. It will be determined subject to the spending review and confirmed by the Department for Energy Security and Net Zero soon.

However, only certain areas in England will receive funding for this grant. Letting agents can find out which areas are eligible for funding and more information on the grant on the government website.

What does the future hold for EPC regulations?

Labour plans to open the application window for the Warm Homes initiative in October 2024, though the exact date is still to be confirmed.

Additionally, the Department for Energy Security and Net Zero is launching a consultation in the same month aimed at improving EPC accuracy and reliability.