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Why Landlords Shouldn’t Shelve Energy Efficiency Plans

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It is well known, according to Stephanie Thayer, an Associate Mortgage Adviser at Progeny, a B Corp certified company, that the UK government has a target to reach net zero by 2050 and one of the stepping stones to this is making homes more energy efficient. The UK has the oldest housing stock in Europe, and it is no surprise that politicians have identified this as an important issue to tackle.

One proposal which had been on the minds of many landlords and mortgage lenders was the intention to bring in new legislation requiring landlords to ensure their privately rented properties achieved an Energy Performance Certificate (EPC) of C or above by 2025.

Stephanie Thayer

Currently, any domestically rented property in the UK must have an EPC rating of E or higher, unless the property is exempt (the most common exemption is when a property is listed and energy efficiency improvements such as double-glazing would unacceptably alter it).

However, following the Prime Minister, Rishi Sunak’s, announcement on 20th September, the requirement for an EPC of C or above for landlords has now been scrapped as part of the government’s green review.

What now?

Many landlords may be relieved to no longer have a hard deadline to make potentially expensive energy efficient upgrades, especially when many are currently being hit by much higher interest payments. However, it’s wise for landlords to not shelve plans altogether and still invest in improvements to properties over the coming years for several reasons.

Firstly, it is likely that incentives for energy efficiency are going to continue to be lender-led, with some mortgage providers offering better interest rates for mortgages on energy efficient homes (typically classed as A or B).

Secondly, with a general election looming, we could still see EPC regulations changing in the near future, for example if we see a change of Government.
Thirdly, energy efficient rental properties are more attractive to potential tenants, with research showing that 78 per cent of renters considered the EPC certificate important when searching for a property. They are more likely to attract longer-term lettings, due to the savings in monthly energy bills.

What actions can landlords take?

Landlords would still be advised to consider several actions, to help them plan ahead.

If their rental property has an expired EPC (they last for ten years from date of inspection), they should obtain a new one, as it will identify areas where they could improve their property’s energy efficiency. Landlords can find a registered domestic energy assessor on the EPC Register, plus there can often be deals out there via lenders, such as Skipton Building Society, who is currently offering free EPCs to anyone who holds a mortgage or savings account with them.

Invest in incremental energy saving improvements to the property in preparation for any future legislation. There are lots of ways to do this such as insulating the floor, walls, or roof, upgrading the windows and boiler to installing a heat pump. There may potentially be government grants to fund some of these improvements and The British Landlord Association provides details of the funding available to improve the energy efficiency of privately rented properties. Landlords can also borrow money to help fund costs and some lenders incentivise borrowing for energy-efficient improvements. The Mortgage Works for example currently offers additional borrowing for green home improvements at a lower initial interest rate than standard.

If seeking to purchase a further investment property, landlords might want to consider a new build as they are typically more energy-efficient than older buildings, with 84% of new builds built between September 2020-September 2021 being rated A-B.

While there may be alterations to specific policies in the short term, the UK’s commitment to net zero by 2050 remains unchanged. By planning and investing at their own pace, landlords will be able to take advantage of cost-effective, energy-efficiency financing, grants, and incentives, as well as attracting higher rents, faster lets and lower voids via greener rental properties.