EPC ratings - what does it mean for Landlords, what will change?

Everyone wants their properties or property to be as energy efficient as possible.

But you can forgive landlords for having some concern over the direction of travel when it comes to what is and what isn’t required for property that they rent out.

EPC Ratings

Energy Performance Certificate or EPC ratings range from A (most efficient) to G (least efficient). They assess how energy-efficient a property is based on factors like insulation, heating systems and lighting.

Landlords are required to provide an EPC to prospective tenants and the certificate includes recommendations to improve energy efficiency and reduce energy costs.

The current rules which have been around since 2018 say all let properties must have an EPC rating of at least band E. But plans had been in motion for quite some time to change that to band C meaning landlords up and down the country would be forced to make energy improvements to their properties which, in some cases, could cost have cost them thousands of pounds to implement.

No Changes

However, last September Prime Minister Rishi Sunak made it clear that landlords would not have to go ahead with long-planned energy efficient changes to their property when he promised more time for households to make the transition to heat pumps under plans to decarbonise the country’s homes.

In the original proposed changes all tenanted properties, both existing tenancies and new ones, would have needed to have an EPC rating of at least band C from 2028.

Now that’s all changed and it’s almost back to square one. But, as mentioned earlier, almost everyone wants their properties or property to be as energy efficient as possible.

Room for Improvement

So whilst it’s no longer a requirement for landlords to have an EPC rating of at least band C in their rental properties, the government, for now, hopes that many will still want to.

Indeed, recent research from buy-to-let lender Paragon Bank found that almost four in 10 (37%) portfolio landlords (those with four or more properties) are continuing to upgrade their properties to EPC C or above, despite proposed regulations being scrapped.

The research, carried out for Paragon’s Portfolio Landlord Report 2024 also found that almost a third (32%) of portfolio landlords only hold properties rated EPC C or above.  

However, it also found some landlords are more reluctant to upgrade their properties in the absence of direction from Government, with 16% postponing undertaking any works until legislation mandating EPC C or above is introduced. One in 10 state that the proposed rule change has no bearing on their portfolio strategy.

For those undertaking improvement works shared their anticipated timescales for completion, with 28% expecting to reach EPC C across their portfolios within one to two years and 22% in three to four, the two most common responses.

This was followed by 18% who expect to finish green upgrades within the next 12 months and a similar proportion, 17%, who feel it will take them five years or more to hit the previously mooted targets.

PRS Outperforms

And government data shows that the energy performance of properties in the private rented sector (PRS) now outperforms owner-occupied homes. The English Housing Survey shows that 44.9% of PRS properties have an EPC of A-C, compared to 43.3% in owner-occupation. The data shows that 2.18 million PRS properties were at EPC A-C in 2022, up from 830,000 a decade earlier.

Chris Kirby, Head of Key Accounts & Specialist Distribution at The Mortgage Lender, reckons buy-to-let will continue to play an important role in the residential property market, ensuring that there continues to be a good supply of quality and well-maintained rental properties to meet consumer demand.

And according to The Mortgage Lender’s own research, a majority of buy-to-let landlords are now focused on growing their property portfolios with over half (52%) of landlords adding to their property portfolios in the last 12 months.

For now, residential landlords must ensure their rental properties meet minimum energy efficiency standards and have a minimum EPC rating of E.

Of course, there is a General Election presumably at some point later this year and it’s quite possible a new government could take a different view altogether.