Going Green: What landlords need to know now

Landlords can be forgiven for being exasperated by the government’s exhortations to go green.  

I don’t need to rehearse here again here all the recent changes in legislation and taxation that have made being a landlord less profitable and much more fraught.  Are landlords now seriously going to be made to pick up the cost of meeting the Government’s stretching target of net zero greenhouse gases by 2050?  

The answer is Yes - to some extent - but perhaps not as much as many currently fear.  Landlords may hold more cards than they think.

The current state of play is that there is a Bill wending its way through Parliament that will make it illegal to rent out a property with an EPC of less than a ‘C’ by 2028.  

By 2025 no new tenancy agreements can be taken out on properties with an EPC of less than ‘C’ and that date is not far away.  

Given that around 3.2m privately rented properties in England and Wales have an EPC rating of D or below this is quite some undertaking and unsurprisingly there is carrot and stick being used to make it happen.  

Without a doubt we can expect tenants to become more interested in the energy efficiency of the homes they rent.  Quite apart from being concerned about the environment the current soaring cost of fuel will be a motivating factor.  The first step for landlords is to dig out the EPCs for their current properties and see what can be done.  

An EPC will show you the current energy rating for your property (on a sliding A to G scale) and what it could achieve if certain listed recommendations were made.  We have teamed up with Elmhurst Energy, the largest training provider and accreditation scheme for EPC assessors, and their website provides plenty of useful advice on how to read and act on an EPC.  

Sometimes simple adjustments such as more energy efficient lighting and draught excluders will make a difference.

Lenders too are responding to the focus on climate change by launching green-related mortgage products.  We have counted the number of these aimed at landlords as increasing threefold in the last six months.  So, if you already have energy efficient properties on your books you could be reducing your mortgage costs so it will be worth talking to your lender or broker.  We have reprogrammed our algorithms to flag to a customer if there is a green deal that would save them money.

But there is ‘stick’ as well as carrot.  

Whilst the ‘C’ requirement will not apply to all tenancies until 2028 we can expect lenders to be asking questions of landlords with low rated properties well before that.  The last time the certification was upped, which was then to an ‘E’, we saw lenders build it into their decision-making process well before the deadline.  Quite apart from not wanting to lend to properties that can’t be rented beyond a certain date, lenders too are under pressure to ‘green’ their lending portfolios.

What though you may be asking of the properties that will struggle to reach a ‘C’ without a huge amount of expenditure?  

At the moment landlords are expected to spend up to a cap of £3,500 to improve energy efficiency but there are already calls for this to be upped to £10,000.  My view is that the government know full well the risks they would be running here by putting such a huge increase in costs on the private rented sector.  

A housing minister at the Conservative Party conference said only the other day that the government was wary of the “untended consequences” of adding to the burden on landlords.  As well they might, particularly now they have had to abandon their planning reforms which would have forced local authorities to give up land for development.  Fewer new houses will mean more reliance on the private rented sector which already houses almost one in five households.

The countdown is on for the government to publish its long-delayed and surely imminent Heat and Building Strategy.  This should give landlords and indeed all of us some sort of roadmap from how we get to where we are now to where we need to be.  

It must surely contain either financial support to make the transition or at the very least a reasonable limit on what can be expected.  Landlords should do what they can to make a difference at the moment but if this all resembles a game of grandmother’s footsteps it’s not time to run for the hills yet.

Angus Stewart is chief executive of online buy-to-let mortgage broker Property Master.

Want to comment on this story? If so...if any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals on any basis, then the post may be deleted and the individual immediately banned from posting in future.