Landlords running out of time to meet energy efficiency targets, experts warn
The latest data from the Office for National Statistics (ONS) on energy efficiency in homes in England and Wales shows that the government needs to up its game if it is to meet EPC targets by 2025, mortgage experts have said.
The study by the ONS, released on Tuesday, found that the median energy efficiency score in homes is equivalent to band D, with Yorkshire and The Humber reporting the lowest average score.
The government has ruled that, as from 2025, all buy-to-let property starting a new tenancy will require a more efficient EPC rating of ‘C’, although existing tenancies will have until 2028 to comply. Landlords who fail to provide a valid EPC could also be fined £30,000.
The ONS has previously said that the age of the property “is the biggest single factor in energy efficiency of homes”, adding that three-fifths of assessed homes have low energy efficiency ratings.
In addition, although the median energy efficiency score has risen over time in England and Wales, the latest ONS analysis also found that the percentage of social rented dwellings (lower-cost rented housing provided by landlords registered with the social housing regulator), with an energy performance certificate (EPC) rating of C or above has fallen over time in homes in England.
Almost all homes built since 2012 in England and Wales have a high energy efficiency rating, compared with just 12% of homes built before 1900 in England, and 8% of homes built before 1900 in Wales.
However, according to a Eurostat study from 2015, more than one third of the housing stock in the UK was built before 1946.
The Chartered Institute of Housing’s (CIH) 2022 UK Housing Review concluded that “a lack of clear government strategies” as well as insufficient financial incentives were “undermining progress on decarbonisation in the residential sector”.
Lisa Martin, development director at the TMA Club, warned that landlords were running out of time to implement the necessary changes to their properties, given that approximately two thirds of privately rented homes - around 3.2 million properties in England and Wales - had an energy rating of D or below.
“It’s further evident that a minority of landlords are not only unprepared, but unaware that in 2025, they will not be able to rent out properties with an EPC rating below C, should the proposed changes in the Government White Paper come into effect,” she said.
However, Martin stressed that this was an opportunity for brokers to grow their business.
“Brokers should seize the opportunity to contact clients and inform them of the changing regulatory landscape, ensuring they have enough time to update properties ahead of the regulatory changes and prevent them from missing out on rental income,” she explained. “Otherwise, landlords may opt to sell properties where the retrofit is too costly – we’ve already seen landlords showing a preference for new builds as they are already A or B rated.
“Brokers will also be vital in signposting financing options to make the necessary improvements to properties. Independent advice will be crucial to finding tailored solutions to meet individual requirements.”
Jonathan Stinton, head of intermediary relationships at the Coventry Building Society, was also critical of the government’s slow progress.
He said: “The Government has made numerous commitments to accelerating the green agenda over the last few years, but we are yet to hear any updates on progress. In December 2020, Boris Johnson announced a target of net zero carbon emissions by 2050, yet we are still lacking clarification from the Government in basic areas like EPC legislation.
“With the appointment of the new prime minister, the Government now has an opportunity to develop a clearer green focus that everyone can rally behind. This is an issue that affects homeowners and landlords alike. Support and incentives to improve the energy efficiency of homes up and down the country will not only help meet ‘Green’ targets, it will also help to limit long term energy bills that have become such a concern for everyone.”
He also said that the mortgage industry needed to adopt “a collaborative approach” in order to achieve realistic goals in this area.
Malcolm Webb, technical director at Legal & General Surveying Services, warned that with the rise in the cost of living, households were being put off from investing in energy efficiency measures.
He said: “Given the current cost-of-living crisis, it’s natural that many people are concerned about the price of retrofitting their homes. The result of inactivity though is that a considerable portion of the UK’s housing stock is still underperforming when it comes to energy efficiency.
“Improving the energy efficiency of the UK’s housing stock is vital, both for the environment and to safeguard the investment people have tied up in their homes. It may not be long before the value of a property is influenced by its energy performance, so making these improvements now can keep homeowners ahead of the curve, and ensure their properties are attractive for future occupiers.”
He pointed out that the benefits of making the necessary changes, such as installing loft or underfloor insulation or replacing a boiler, although requiring an initial investment, would result in a larger stock of homes suitable for the future.
He also called on the government to provide more financial support.
“Currently, government initiatives, like the Home Upgrade Grant and the Boiler Upgrade Scheme, can go some way towards easing the costs of retrofitting, but more support is needed. Housing is a key part of the larger journey towards net zero. To benefit from this, homeowners, builders, and the government all need to work together to implement appropriate energy-saving solutions,” he said.
Craig Hall, director of LSL New Homes Financial Services, said the ONS figures showed that despite energy efficiency improvements being an increasingly hot topic, millions of properties “are still unprepared for upcoming EPC regulation changes”.
He said: “Some landlords are unaware that in less than three years, they will no longer be able to rent out properties with an EPC rating lower than a C if the proposed regulations do indeed come into place in 2025.
“It is crucial that lenders explore collaborative solutions to provide customers requiring a retrofit with the vital support that they need to implement such work. At the same time, new build homes, 84% of which have an EPC rating of B or above compared to less than 4% of existing properties, offer unique benefits for buyers and landlords by helping them save an average of £2,000 in energy bills and helping reduce carbon emissions by more than two tonnes per year.
“Some lenders have also launched enhanced affordability assessments for new build homes with A or B EPC ratings. It is therefore important that all mortgage intermediaries optimise this window of time, by not only educating their clients about the changing regulatory landscape but also enabling them to both access and afford new build properties.”