Landlords are operating in a fog when it comes to the Government’s thinking on the future of energy efficiency standards for privately rented property.
We have had no official update from the Government following its consultation closing in 2021, although DLUHC Secretary of State Michael Gove recently told media the Government was considering delaying the implementation of new standards as it was conscious of the pressures landlords are facing.
Whilst it is a positive move that we are not rushing into introducing a deadline that is impossible to meet, the mere threat of the proposals has already influenced landlords’ business strategies.
As a reminder, the Government has proposed that all new tenancies should have a minimum EPC rating of C from 1 April 2025, with all tenancies meeting that standard from 2028. Also as a reminder, if the policy had been confirmed on 1 August, that would require 3,742 rental properties to be upgraded per day, more if we discount weekends and bank holidays.
We recently surveyed over 1,200 landlords for our report, The rental sector energy challenge, and found that 15% have purchased a property with an EPC rating of between A and C in anticipation of the tougher requirements, with a further 10% acquiring D-rated property with a view to upgrading.
It highlighted that the proposals are influencing landlords’ business strategies more broadly, with just under six in 10 having taken some form of action as a result. In addition to acquiring A-C property, one in five landlords have already made improvements to bring a property’s EPC rating up to C or above.
A similar proportion, 14%, indicated that they are currently in the process of retrofitting their properties with energy-saving measures to increase the EPC rating to C or above.
This could be considered a positive step; the Government has committed to Net Zero by 2050 and landlords will have to upgrade property at some point in the future, so it is better to start sooner rather than later.
However, it is difficult to operate any business in an environment of uncertainty, but that is what landlords are being expected to do currently without any clarity from Government. When you add in the Renters Reform Bill, slowly making its way through Parliament, you can understand why landlords are suffering from regulation fatigue.
As lenders, we fully endorse the need to improve the energy efficiency of the nation’s rental stock. It is better for the environment, creates a more comfortable home for tenants and should improve the value of the underlying housing asset. We have supported landlords through preferential mortgage pricing for A-C-rated property and we are examining products to help landlords upgrade existing homes.
However, we are also sympathetic to the time pressures landlords would face if a too-onerous deadline was imposed. This is a message we have consistently delivered to Government, along with warnings over the gold rush it wouldcreate for shoddy tradespeople taking advantage of the tight deadline, the need for a Government kitemark scheme for acceptable technologies, and proper investment in green infrastructure, including skills.
We have also asked for clarity.
Even if that clarity is simply that the Government is taking a fresh look at the situation and that the 2025/28 deadlines won’t apply, it would deliver some level of certainty for landlords.
* Louisa Sedgwick is Commercial Director of Mortgages at Paragon Bank *
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The EPC requirements, the Rental Reform legislation and all property licensing should be scrapped immediately in order to bring stability to the private rental sector. That would benefit everyone.
If the minimum EPC standard becomes C in 2025 I suspect 40 percent of rental properties will disappear overnight. Where will the government house these people? I have 10 rental properties. 4 are C and the rest D. I can get 1 of the houses up to a D by installing external cavity wall insulation. All my houses have decent boilers, gas central heating individual radiator valves, good loft lagging, energy efficient lights, good double glazing, thermal blinds and thick curtains. The other 5 houses are Victorian terraces so can't have external cavity and installing internal walls and cavity would be approximately £14-17k each. To save tenant about £12-15 per month. The houses will be made smaller too. It's not cost effective and I'd be forced to sell. In those 5 houses live 11 adults and 13 children. What is ridiculous is that if those tenants owned those houses they could carry on living in them. This government attacks LL insisting the standard is higher for them (C) than the general public who only have to have an E. It would make much more sense to say we need to get D across the board and say 50 percent grants will be available to get property upgraded from either a E to a D or a D to a C for everyone.
The Conservative's Minimum Energy Efficiency Standard (MEES) legislation (2015), sensibly phased in from 2018 for new lettings and this April 2023 for continuing lettings, has been incredibly successful in helping landlords (both in the private and social sectors) steadily upgrade their rental units. Not a single EPC Grade F or G house or flat (the most energy wasteful and expensive to heat housing in the country) is now being lawfully rented out. That's a massive Tory & British Success Story. It now seems sensible and proportionate to steadily lift the MEES Standard to EPC Grade D. Grade D is simply the average EPC Grade for the UK. We can now get the PRS up to the average national energy efficiency standard. Almost all rental units in the social rental sector have already been upgraded to EPC Grade D and above. They've been getting on with making their units better for years. 2028 seems like a realistic target for MEES Grade D for both new lettings and continuing lettings. A small but vocal minority of domestic landlords have chosen not to improve their assets by installing wall and loft insulation and an efficient central heating system. It's their energy wasteful houses and flats that are not 'fit for purpose' and that are giving professional domestic landlords a very bad reputation in allowing tenants to live in fuel poverty.
With immediate effect the domestic EPC calculation should be bought in line with the commercial EPCs so that the main EPC coloured graph and Grade shows the carbon dioxide pollution calculation and not a running cost calculation. This very simple change will then favour the steady transition over to low carbon electric heating such as the brilliant Dimplex Quantum heaters and air-to-air and air-to-water heat pumps. The running cost EPC Grade can still appear on the certificate to help landlords understand if their tenants are in fuel poverty or not.
Now is the right time to up-date the domestic EPC calculation methodology because over the last 15 years since the EPC national measurement system was launched we have developed a massive amount of 100% renewable electricity generation from North Sea wind farms and the HVAC industry has designed excellent low running cost electric heating systems for domestic housing.
All very simple, all very doable and really no drama for domestic landlords who have been steadily improving their assets over many years.
Still waffling I see!
Not even strictly accurate.
Lots of F and G rated properties are still legally let as they have exemptions. A listed building can't be messed about with and have insulation installed so they are exempt from the requirements. Other exemptions exist for buildings where it is impossible for the landlord to achieve the standard. Leasehold flats where freeholder consent is withheld for example.
The EPC score is absolutely no indication of heating costs.
My own house is EPC A93. It is detached, was built in 2004, 2 of us live in it, our gas consumption is 10951 kWhs a year and we were decidedly cold last winter. One of our other houses is EPC C71. It is detached, was built in 1953, 3 adult tenants live in it, the gas consumption is 10251 kWhs a year and they were much warmer than we were last winter. The main difference is that it is North/South facing whereas ours is East/West.
Clearly Martin has zero idea of the financials and a basic cost benefit analysis. If a tenant can afford the rent and the heating bills then they should be allowed to choose a D rated property. Those that can’t afford to heat their homes should choose a C or above if it bothers them that much.
To be honest it’s all a ploy by the elites and the globalists to force private landlords out of the market under the guise of their spurious climate change woke ideologies as planned by them at their club called the World Economic Forum. Climate Change is always going to exist. Global warming will occur but not for the reasons they are portraying ie blaming us. I don’t see Klaus and co slumming it on public transport…chauffeur driven cars and private jets all the way for them.
Anybody that supports this miserable-it’s and tyrannical agenda is assisting in the genocide of the middle and lower working classes and the poor and should be in prison (all the politicians).
Gibbons...... Zzzzzzzzzzzzzzzzzz. Zzzzzzzzzzzzzzzzzz. Zzzzzzzzzzzzz
Why don't you just go away and stop annoying everyone?
Hi Martin, you make some good points. Particularly aligning the EPC cost based system with target carbon efficiency ratings.
In the end I think they will delay it and downgrade it to a D, but if this does go ahead at a C in 2028 🆘🆘🆘 there will be masses of sell offs and evictions, I think even Gove will be bothered by that 😱
If there was any consistency between assessors it would be a start. A 10 point difference of opinion in fairly common on older properties. One of mine had a 19 point difference.
Then there's the disagreement on which is the primary heat source. One of my ex Council ones has a night storage heater in the hall, electric panel heaters in the bedrooms and a gas fire in the lounge. The two most recent assessments classed the storage heater as the primary heat source and said replacing the old storage heater with a Dimplex Quantum would get the properties to a C. Another assessor (at a NRLA meeting) said the hallway heating couldn't be taken into account at all and I would need a gas central heating system.
How are we supposed to make informed decisions when the assessors can't even agree with eachother?
The main issue in my mind is the conflict between what is acceptable to achieve an EPC Band C that also meets zero carbon targets. I'm not entertaining one without the other. The only answer in my mind is the introduction of hydrogen gas.
Why is anyone giving credence to EPC’s. It is just theoretical, it does not apply in my circumstances. I cannot speak about other peoples experience. I have a lot of HMOs where I pay for the heating and the EPC grading bears, no relationship to the cost of heating the properties. I think people delude themselves into believing that roof, wall insulation, double glazing, energy-efficient, boilers, double glazing, low energy bulbs, make any difference and I agree, logically they should, but they don’t. I am not saying insulation does not have a benefit. It makes the properties more comfortable reduces sound and can reduce mould. Does it reduce the cost of heating on the property and the answer is sadly no. I want it to work because not only will I be doing my bit to save the planet but saving money as well.
EPCs and energy, efficiency is one of the biggest cons ever played on the British public. Energy efficiency does not work.
Jim HaliburtonTheHMODaddy
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