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Green issues increasingly important for landlords, says lender

Eco issues are increasingly important for landlords, a mortgage lender claims. 

Hodge Bank says a new survey shows 82 per cent of landlords, investors and brokers stated energy efficiency was in the top three considerations, along with broader green credentials about a property, along with its rental yield.

Andy Button, head of investment finance at Hodge, says: “The buy to let market is particularly buoyant right now, with demand continuing to grow throughout the pandemic, and it’s interesting to see how the priorities for landlords are changing when looking to add to their portfolio. 

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“While rental yield and potential for capital growth are, of course, top priorities, our research reflects a change in mood of the market, where sustainability and green credentials are becoming ever more important.”

He says landlords and agents must offer choice in sustainable housing options to cater for tenants’ increasingly green interests.

“It’s clear that sustainability will feature more and more in new-build development design.

“More stringent compliance to EPC and an investment strategy more closely aligned to sustainability could actually improve cash flows in the longer term, as tenants might be prepared to pay higher rents in exchange for lower utility costs.”

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    As a LL I would only buy a property with, or able to get, an EPC of C or above. Not because I think this will help climate change or carbon emissions or even because tenants want this. No - simply because of arbitrary Govt targets likely to be introduced in the next few years. This will not make the housing sector better in terms of CO2 emissions, it will simply transfer inefficient &/or characterful houses to the owner occupier sector and reduce the PRS to boring, standard, but well insulated boxes.

    While Boris slaps himself on the back for achieving a target whilst signing off a new oil drilling platform and cancelling the Green Homes Grant, prospective tenants will be fighting over the few overpriced rentals available to them!

  • Andrew McCausland

    I think the author has a point about LL's increased awareness of the importance of the EPC. Some of this is down to the desire to help the environment but in my experience most of this is currently driven by awareness of the impending changes to MEES. Although not yet confirmed, the likelihood is that we will require our properties to have an EPR of C or better in the coming years if we want to let them out.

    I must say I support the aim. We have no way of hitting our carbon reduction targets without a substantial reduction in energy use in our homes. Retrofit insulation and increased use of microgeneration measures are the only ways to achieve this.

    There has been talk of this coming in by 2025. Personally I think this date is too ambitious for 2 reasons:

    1. Lack of suitably qualified fitters and tradesmen. There are simply not enough qualified builders out there to complete the enormous amount of work required in the time allowed. This has been made worse by Brexit as many of the infamous Polish plumbers and Lithuanian plasterers have returned home. The supply of home-grown talent is currently insufficient to make up the numbers on normal building projects never mind the increased numbers needed for retrofit.

    2. Cost. Retrofit insulation and low energy heating systems are not cheap. A whole house retrofit on a 3 bed semi with insulation, ventilation and microgeneration installation could cost up to £25k. Who will pay for this?

    Improvements to rental properties are a perverse cost; the landlord pays but the tenant gets the benefit of lower heating bills. It is therefore very difficult to persuade a LL to invest in this unless there is a way for them to get a return on their investment.

    Government needs to urgently address this problem. Options include something like Green Deal 2.0 (but with substantially better implementation), an increase in targeted grants to those tenants in fuel poverty and a VAT exemption on energy efficiency measures.

    There also needs to be a dramatic increase in training funding for those in the industry who are going to complete the works. The start-stop funding of the past decade has discouraged many building companies from investing in this area to the detriment of the country as a whole. A coherent long term strategy with guaranteed funding is now needed.

    Due to the scale of the problem and timescales involved a combination of all of these options is urgently required.

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    Andrew raises a lot of good points, however until the EPC regulations apply to the whole housing market not just the PRS & until EPCs accurately reflect improvements made and don’t ask for silly improvements it just feels like the Govt scoring points at LLs expense.

     
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    What a load of nonsense. Landlords aren't interested in green issues and I haven't seen a tenant yet that has looked at an EPC.

  • George Dawes

    I’ve let shops and flats out for almost 25 years now , nobody and I mean nobody has ever mentioned epc let alone asked for one

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    At the end of the day it'll be the tenants paying again

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    Andrew I hate to disagree in London I am getting less Rent than 10 years ago generally while costs have been loaded on to us, so it can’t be added on plus Tenants have acquired many new rights at the say time LL rights removed putting us at a total disadvantage.

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