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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