The rising cost of living is driving a shift towards energy efficiency improvements in the private rented sector, according to the latest industry-leading research from Shawbrook Bank.

Nearly three-in-five of renters say they would be less likely to consider a property with an energy rating of D or below – prompting more than half of landlords to make efficiency improvements in the last six months. 

Nearly two-thirds have brought forward upgrades because of sharp inflationary pressures.

The findings – drawing on views from tenants, landlords and mortgage brokers – are part of Shawbrook’s second report on the government’s proposed changes to EPC requirements for rented homes.

Although the plans have not yet been put into law, it’s widely expected that landlords will have to meet a minimum EPC standard of C for all newly rented properties in England and Wales by April 2025. The measure would apply to existing tenancies from 2028.

Despite the impending regulatory changes, Shawbrook’s research shows that a significant knowledge gap remains. 

While 78 per cent of landlords say they have now heard about the 2025 proposals, more than a third know only ‘a bit’ about the changes. Three-quarters of mortgage brokers are concerned their buy-to-let clients don’t know enough.

There are concerns that many could exit the market, with significant effects on the availability of properties. 

Nearly two-thirds of landlords say they could sell their properties in the next five years because of the burden of EPCs. Nearly two-in-five brokers with buy-to-let clients have seen them exit the market rather than make energy efficiency improvements.

Emma Cox, managing director of Real Estate at Shawbrook, says: “Whatever happens with the government’s proposals, it’s clear that landlords need to be thinking about making energy efficiency improvements to safeguard their rental properties. As well as the need for clarity from policymakers, the industry has a significant role to play in supporting landlords. Only by working together can the industry play its part in safeguarding the future of the private rented sector.

“As a specialist lender, Shawbrook has been developing finance discounts to help landlords improve their properties – rewarding those with properties that are up to standard and incentivising those who need to make upgrades. We’re committed to building on the findings of this research – and the conversation around it – to developing new solutions to drive the sector forward.”

Chris Norris, Policy Director at the National Residential Landlord Association, adds: “The efficiency of our housing stock needs to improve but the challenge for the private rented sector is two-fold.

“On the one hand, there is the matter of the split incentive, where landlords are necessarily required to pay for the works but see little or none of the benefit. On the other, there is the net cost of the works required, which is substantial to say the least.  

“The investment required in our housing stock represents a potential burden for many landlords that they are highly unlikely to be able to shoulder alone, without significant changes to the tax system and some form of financial assistance along the way.”