How are landlords planning to meet the 'C' rating?
Two in every three landlords in the UK owns at least one rental property that does not meet the government’s proposed energy performance certificate (EPC) ‘C’ rating, new research from specialist lender Foundation Home Loans has shown.
The research follows a recent government announcement regarding upcoming consultations on stricter EPC standards for private and social rented housing. The proposal aims for all rented properties to achieve an EPC rating of ‘C’ or higher by 2030.
Currently, private rented homes only need to meet an EPC ‘E’ rating to be legally let, while social housing has no minimum energy efficiency requirement.
Despite the proposed shift, landlord awareness of EPC requirements is high, with 92% reporting some knowledge of the standards. However, only 67% said they fully understand the specific details. Portfolio landlords, those with four or more buy-to-let mortgages, showed slightly lower comprehension, with 62% indicating full awareness of the requirements, compared to 69% of unencumbered and consumer landlords.
In response to the proposed changes, 42% of landlords plan to make improvements to bring their properties up to the EPC ‘C’ standard. Of these, 24% intend to make only the minimum updates needed for compliance, while 14% plan to invest in improvements that could boost the property’s long-term value. Another 3% plan to meet the standard and then sell the property.
However, a significant portion of landlords appear reluctant to invest in upgrades. About 34% said they plan to sell affected properties rather than undertake the work, while 3% do not intend to make any upgrades and will continue letting the property. A further 17% were undecided on their approach.
For those committed to making improvements, funding strategies vary. The majority (71%) plan to use savings, while 42% expect to raise rents to cover the cost. Some landlords are looking to government grants (28%), while smaller groups intend to release equity (12%) or take additional loans (5%).
The average estimated cost to reach an EPC ‘C’ rating is £12,000 per property. Common planned upgrades include solid wall or floor insulation (37%), loft insulation (26%), boiler or heating system upgrades (25%), and installing solar PV panels (22%). Notably, 13% of landlords are uncertain about the specific improvements required, and 37% are unsure of the overall costs.
“With potential new legislation aiming to raise energy efficiency standards and tackle fuel poverty for millions, landlords face important decisions around future-proofing their investments from an EPC perspective,” commented Grant Hendry (pictured), director of sales at Foundation Home Loans. “As landlords adopt varied approaches to meet these standards, ranging from minimal-cost upgrades to comprehensive property improvements, it’s clear that personalised guidance is essential.
“Green mortgage solutions can offer landlords a strategic way to finance these upgrades, enhancing property value and reducing long-term costs. For lenders and intermediaries, these conversations not only strengthen client relationships but also broaden the scope of services in a sector increasingly focused on sustainability.”
The research’s findings, part of the Foundation’s Q3 2024 Landlord Trends report and conducted by Pegasus Insight, are based on 720 online interviews conducted between September and October 2024.
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