Compliance burden prompts more landlords to consider selling
Government proposals on energy performance certificate (EPC) standards have become the primary reason landlords are considering selling their properties, according to new analysis by research and consultancy firm Pegasus Insight.
The latest Landlord Trends report indicates that 38% of landlords expect to sell at least one property within the coming year. Energy efficiency requirements have overtaken tax and interest rate concerns as the most frequently cited reason for divestment.
New energy efficiency measures present several challenges for landlords, making compliance difficult for many in the sector. The reasons include high upgrade costs, complex and sometimes unclear requirements, and ongoing uncertainty about future regulations.
Many landlords struggle to understand what improvements are needed and when, especially as government guidance can be lacking. Larger portfolio holders face greater challenges, as multiple properties may require significant investment to reach compliance. This combination of financial burden, regulatory complexity, and insufficient support has led some landlords to consider selling rather than upgrading their properties.
According to the research, over half of landlords (56%) own properties with a ‘D’ rating, while 20% hold assets rated ‘E’, ‘F’, or ‘G’. On average, 42% of properties in a typical landlord’s portfolio fall short of the government’s target of an EPC ‘C’ rating or higher. Larger portfolio holders are especially exposed, with 78% of those owning more than 11 properties reporting an average of 9.2 properties rated ‘D’ or below.
The report further reveals that landlord confidence in future regulation remains low. Many respondents cited ongoing uncertainty regarding the timing, details, and financial implications of EPC and minimum energy efficiency standard (MEES) reforms.
“Energy efficiency rules are now a decisive factor in landlords’ business decisions,” said Mark Long (pictured right), director at Pegasus Insight. “With around half of rental stock still below the target EPC threshold, the cost and complexity of upgrades are prompting many to rethink their portfolios.
“This is a pivotal moment for the sector: the ambition to improve energy standards is welcome, but without clearer guidance and practical support, there’s a real risk that good landlords will simply choose to exit the market rather than invest.”
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