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By Daniel Clinton

Head of Legal, The Mortgage Works

OTHER FEATURES

Energy Special: Can landlords afford to meet new EPC targets?

With currently less than four years before all new tenancies need to be in properties rated EPC ‘C’ or above, there are still landlords who need to undertake remedial work on at least one of their properties. 

They are therefore understandably concerned about how they will both fund the work, find someone to do it and have it completed in time.

The side effect of these concerns is that a significant number of landlords admit they are ready to give up and already considering selling properties. 

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An unintended consequence of this sentiment could result in a backwards step in meeting the government’s target around climate change, for example, if these properties are taken up by the owner occupier market, where there are currently no minimum energy efficiency requirements. 

Working with the sector to understand how best to help landlords improve the energy efficiency of their properties and the timeframe within which they can do this may ultimately lead a better outcome for everybody.

Financing is also key and while our research suggests landlords have money set aside to deal with unexpected costs arising from their properties, it may not be enough to also cover the energy efficiency improvements. 

The Mortgage Works’ latest research shows that landlords have an average of £15,579 set aside to cover unexpected costs with their rental properties. However, more than half (51 per cent) have less than £10,000.

Although landlords with multiple properties have a larger sum set aside to deal with unexpected costs (£35,202 for those with 20 or more properties), the average amount they have per property is actually less than those landlords who have just one or a small number of properties.

That is why The Mortgage Works launched its Green Further Advance earlier this year, giving landlords access to funding at a lower interest rate than they would get on a standard further advance and helping reduce the upfront cost facing landlords as they try to meet the government’s deadline.

*Daniel Clinton is head of lending at The Mortgage Works 

Nationwide Building Society - parent company of The Mortgage Works - is working in partnership with MakeMyHouseGreen on a pilot scheme to help 300 residential landlords and owner occupiers improve the energy efficiency of their homes through the installation of solar panels and batteries. 

The pilot is available to those in Wiltshire, Dorset, Hampshire or East Sussex and more information is available here.

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  • Matthew Payne

    No.

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    I'm in my mid sixties and cannot see a good reason for investing heavily in my portfolio. So I'm thinking of selling my Victorian terraces. It's a real shame for my (long term)tenants who would like to stay. It's also a shame to take more houses out of the rental sector. And a shame for me as these were to be part of my pension. But I cannot justify the cost and effort of organising and paying for the work.

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    I'm late 60s, I really don't want to sell anything, but if I'm pushed into a corner it might be the only way. But whatever happens there is going to be a shortage of properties to rent and the rents will sky rocket .

     
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    The real question should be "Can Tenants afford it?"

    We're running a business and can only sensibly invest for a positive return on our investment.

    If energy efficiency measures won't be cost effective for us, we won't invest in them.

    The recent energy cap debacle, previous ban on bank's penalising bad debtors, forthcoming ban on insurance companies giving incentives for new business are all evidence of how government interference with the intention to protect the feckless comes back to bite EVERYONE.

    Let market forces prevail and cost effective energy saving measures will be provided by prudent landlords for an appropriate increase in rent but non cost effective measures will be avoided.

    Forcing us to do otherwise will result in landlords replicating the repeat of the energy company bankruptcies but on a much larger and more harmful scale.

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    No. According to my latest EPC I would have to apply insulation to interior walls (and lose space as well) and possibly also suspend floors. Thousands and thousands which would take 80 years to pay back in lower energy costs - long, long before which greener energy will be readily available, meaning most of the cost would effectively have to be written off. It's a crazy idea, a total waste of money and would lead to a dramatic fall in general property maintenance.

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    This is Boris and Carrie (and Prince Charles) who all think money grows on trees. Insulation is normally made with oil or gas (can be coal). Therefore when you save carbon with heat you spend it with insulation. Ie both generate carbon, C02 (which is a fertiliser). In Britain coal was cheap so we didnt insulate our houses since it was cheaper to burn coal rather than manufacture and use insulation. Instead we made houses with coal fired clay, ie brick, ideal for the climate, and since London has lots of old houses an excellent investment. Unfortunately like green energy property has been ramped in favour of large landowners and so has electricity with wind farms.

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    I don’t believe that there’s any shortage of Housing and won’t be either where are the people going to come from. I see no scarcity what I see is thousands of high rise already built, thousands more under construction, thousands more in the pipe line, if those are filled up no Tenants for traditional LL, our house prices will fall and the big boys as now will get preferential treatment. There are huge waiting lists for Council housing but they are living somewhere already and not interested in paying full or market rent do you think they are stupid or something when they see millions on it already.
    Grenfell disaster 72 die rip in this 22 storey block of Flats but nothing learned at all. Just a mile up same a 40 road 2 Tower blocks 50/55 storey blocks of Flats nearing completion, for good measure 6 more 50 storey blocks of Flats planned for Acton Town Centre half a mile away, need I say more?, the couldn’t cope with one less than half the height/ 22 storey .
    The Company that made the Insulation for Grenfell is likely to be making the product that we are being forced insulated out houses with, good isn’t if they find anything wrong with that down the line the Town will have to be demolished.


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    UN Agenda 21 includes the building of high rise flats to house most of the population in "smart" cities. It fills you with dread! A lot of people think that this is conspiracy theory, sadly it's very real. As an oldie, I feel very lucky to have lived a life where freedom could be enjoyed.

     
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    The reality is that the Government is using EPC (cost of heating a home) to measure green credentials. They are not the same thing. Gas heated houses (dirty fuel) get a better EPC rating that electrically heated (green fuel) based purely on the cost of the fuel. The improvements requested will generally increase green house gas out put and given that the EPCs are not fit for purpose we could all spend thousands only to find that once the green measure changes to EIR at the end of the decade that what we have done needs to be reversed. It is absolute madness to ask for these improvements on a flawed system, only to change the measurement after the improvements have been done. The Government is walking blindly into a disaster.
    Further were all LLs intend on carrying out the improvements requested there are not enough trades people to carry out the work in time. How do we carry out some of these invasive improvements with tenants in situ? Its just a tick box knee jerk exercise carried out by an ill informed bunch or political idiots. I for one am leaving the sector. Sorry tenants but the government is more worried about being seen to do something than your future or forcing you to lose your home!

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    In my experience even when we carry out the recommended improvements the EPC score doesn't improve. The algorithm for EPCs has been changed at some point and assessors are inconsistent with how they input data.

    With no work being carried out between EPCs one of my properties dropped 11 points.
    After replacing a roof and insulating it to 2014 standards another house dropped 10 points (because the Building Control certificate didn't specifically say what thickness of Celotex was used the assessor assumed no insulation).
    Another one had all the recommendations carried out which should have increased the score by 5 points. The score remained the same so it must have lost points elsewhere.
    Another one was supposed to be C if I replaced the boiler and although I've done exactly as recommended it is still D.
    Another one increased from E48 to D65. I had replaced the hot water cylinder but the main reason was because the first assessor hadn't spotted the cavity wall insulation.

    How can we have any confidence whatsoever in EPCs when there is no consistency in the assessment process? If we make the recommended improvements and still don't get the expected score what then?
    The recommendations are often insane anyway. The EPC will state it's assumed there's no roof insulation so the recommendation is to insulate the solid floor???? No mention of doing anything about the roof or how many points that would give.
    We are often powerless to carry out the recommendations if the property is leasehold, listed or in a conservation area.

    We need a complete list of how many points every single improvement would make to the score (not just the 4 or 5 things they currently list). Maybe a complete list of everything including those things we already get full marks for so we don't replace things unnecessarily.
    So if it is assumed the roof is uninsulated how many points would a new insulated roof give us, would new heating controls give us any extra or do we already have the maximum score, etc.l

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    No point in doing anything at present, just wasting money, lets see how this all pans out, if the worst happens all tenants evicted and all properties sold in auction to the highest bidder.

     
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    Am I missing something? If I am required to upgrade my EPCs which incidentally I agree with most of the commentators stands for nothing, I pay for the heating on my HMOs and the EPC rating does not mean the higher the rating the cheaper the heating. I find no difference in the cost of heating a C rated HMO compared with an E rated HMO. I have had A rated boilers fitted, roof insulation double glazing and even had the outside of the building cladded and it makes no difference to the amount of energy used in my HMOs. I wish it did as I would like to save on energy costs.

    If it cost me say £30,000 to insulate a property, I will, if I can, increase the rents to the tenants to cover the cost of borrowing this £30,000. £30,000 at 3% interest will result in the rents going up by £75 a month. In other words rents will increase but I don't think it will do anything to reduce the cost or consumption of energy. The only problem is I foresee is if I am unable to borrow or increase my rents .

    Possibly there may even be further opportunities to acquire properties where landlords are unable to adapt to the new (pointless) energy saving requirements just as we had with the landlords who were unable to adapt to (again pointless) licensing of their HMOs. It seems every black cloud in property has a silver lining .

    Jim Haliburton
    The HMO Daddy

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    This is incorrect insomuch as the decision has yet to made regarding EPC levels by the Government.

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    Agreed, that's how I understand things to be at present, I'm waiting until we know more .

     
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    On one of my properties the recommendation was external cladding cost between £12000 and £18000 , I the payback time from the alleged savings of over 200 years .

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    I like a long term investment, but not that long, we are businessmen, and ladies, we're not going to be tipping money down a drain.

     
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