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The Labour government wants privately rented homes to have a minimum energy performance rating of a C by 2030, says Nicola Goldie, Head of Strategic Partnerships & Growth at Aldermore. Here she looks into the impact this may have on landlords.
Your landlord clients already have plenty on their plates with the forthcoming Renter’s Right Bill and mooted tax changes in the upcoming budget.
But there’s another change coming their way: new Minimum Energy Efficiency Standards (MEES) for privately rented properties.
Landlords and brokers could be forgiven for thinking these targets were recently scrapped, and they’d be right. Rishi Sunak announced a year ago that landlords would no longer need to meet the previous targets (which were on a timeline of 2025 for new tenancies and 2028 for existing tenancies). But that was then and this is now. The new government recommitted to the minimum C-rating target within weeks of coming to power. However, it has extended the deadline to 2030.
Under current rules the minimum required Energy Performance Certificate (EPC) rating for a rental home is E.
The government now wants stricter energy-efficiency standards for rental properties of at least a C-rating by 2030. It’s a big change and will be a challenge for many landlords.
The government wants us to reduce carbon emissions and improve the sustainability of housing, starting with the private rented sector alongside social housing.
Housing accounts for 16% of the UK’s total carbon emissions, so our industry has a huge role to play in helping to hit the 2050 net-zero target.
The energy secretary, Ed Miliband, said the new proposals could also lift over one million households out of fuel poverty.
Landlords have already made great strides to improve the energy efficiency of their property in recent years.
The National Residential Landlords Association said that, according to official data, almost 45% of private rented properties in England had an Energy Performance Certificate (EPC) rating of at least a C by 2022, more than double the rate of 2012.
That’s great progress, but it still leaves a majority of properties with EPCs below the proposed new C-rating.
The financial impact of retrofitting is significant, with government estimates that the required changes could cost £4,700 per property.
Of course, this depends on the individual property, so the figure could vary enormously. It’s not always expensive to retrofit a property and small measures such as insulation and energy-efficient lightbulbs could be all it takes on some rental homes.
There is also likely to be a spending cap for landlords as well as exemptions, but we don’t yet have the full details of the proposals.
According to Hamptons, at the current pace of improvement, it will take landlords until 2042 to bring all privately rented homes up to an EPC C-rating, well beyond the government's suggested 2030 target.
The latest proposals give you a good reason to contact your landlord clients now.
Ask if they know of the latest government proposals and understand how they might affect them.
Check if they know the current EPC ratings of their properties and if not, show them how they can find out, either by using the government’s online search to find an energy certificate or by getting a new EPC.
Once they understand the EPC ratings across their portfolio, they can start to make decisions, from retrofitting to potentially selling.
The proposed EPC changes are still over five years away but, if a landlord needs to raise additional borrowing to fund improvement work, they might want to consider this next time their mortgage is up for renewal.
They’ll also need to be aware of and plan for any logistical challenges. Significant work could be disruptive to tenants, so they might want to plan it in between tenancies. It could also make sense to schedule retrofitting work at the same time as other property improvements. Of course, it might be difficult to book tradespeople in areas with a high proportion of privately rented homes.
There’s no immediate rush, but now is the time to start to talk to landlords and review their options.
It’s not just extra costs and extra work – there’s good news too.
An energy-efficient property is warmer, cheaper to run and less likely to develop damp and mould. It therefore potentially attracts longer-term tenants, who are more able to pay their rent and more likely to stay, meaning fewer void periods. And it could command higher rent.
There’s also a potential premium on properties with higher EPC ratings compared to less sustainable properties.
Brokers can help landlords access green mortgages too, which are designed to support those with energy-efficient homes, or who want to make energy-efficient home improvements. These deals can come with lower rates, lower fees, cashback or greater borrowing power.
Your clients could also access grants and funding to help with the costs of retrofitting. A new funding pot has recently been announced - the Warm Homes: Local Grant - with landlords eligible to receive up to £30,000 towards improvements to their first rental property (if rated D or below), and £15,000 for work on additional homes to let.
Other schemes are still available, so remember to signpost your clients to this potential financial support.
We know the majority of landlords want to provide high-quality, energy-efficient homes to their tenants, but many will be concerned about the costs.
We’re here to support you and your clients with information and tailored products to help them fund any property improvements.
One thing is certain, the shift to a sustainable housing market is happening and we need to work together to reduce carbon emissions in the housing market.
Let’s help landlords get ready by giving them the information and solutions they need to do that.
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