Research finds landlords face average costs of nearly £12,000 per property to meet proposed energy efficiency standards
Landlords are turning to lenders for financial support as they face potentially substantial costs to meet proposed energy performance targets, according to new research from Pegasus Insight.
The consultancy firm's latest Landlord Trends study found that landlords estimate energy efficiency improvements to reach the proposed EPC 'C' standard will cost an average of £11,713 per property. With 60% of landlords owning at least one property rated below EPC 'C', the scale of the financing challenge across the private rented sector (PRS) is considerable.
Despite the costs, appetite for investment appears to be growing. Some 62% of affected landlords said they intend to carry out the necessary improvements, up 13 percentage points on the previous quarter.
Funding, however, remains the central concern. While more than two thirds of landlords expect to draw on savings to cover at least part of the cost, many are also exploring other options — including government grants, further advances, additional borrowing and equity release from existing properties.
Demand for improvements is not solely regulatory in origin. Separate Tenant Trends research by Pegasus Insight found that 44% of renters view EPC ratings as an important factor when selecting a property.
When asked what would make upgrades more achievable, landlords pointed to a range of financial solutions: further advances, dedicated green finance products, preferential rates for energy-efficient properties, and simpler access to retrofit funding.
The research suggests that the availability of suitable finance could be a determining factor in whether landlords proceed with upgrades, pass costs on to tenants through higher rents, or exit the sector.
"For many landlords, the question is no longer whether properties need to become more energy efficient, but how those improvements will be funded," said Mark Long (pictured right), founder and managing director at Pegasus Insight. "Most landlords are willing to invest, but the costs involved are substantial.
"Our research found that landlords believe energy efficiency improvements become financially unviable at around £9,000 per property, yet they estimate the cost of achieving EPC 'C' will average almost £12,000. That leaves a significant funding gap.
"Many landlords are actively looking for financial support to bridge that gap, creating a significant opportunity for lenders to help unlock investment across the PRS. The most successful solutions are likely to be those that make retrofit funding simple, accessible and commercially viable for landlords."
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