All at C: landlords & EPC expectations

Much has been made of resistance among landlords to upgrade their properties to be more energy efficient but if this year’s Handelsbanken Property Investor Report is accurate, the tide has turned.   

Green resistance unfounded?

Of the 200 portfolio landlords questioned, 72% would support a minimum EPC rating of A – the highest grade a property can achieve. This was followed by 53.5% who would back a minimum rating of B and 83.5% who would support a new legal benchmark in buy-to-lets of C. The C rating is something landlords will need to prepare for if their aim is to continue in the private rental sector, with two compelling forces at play.  

C benchmark making a possible comeback

The first comes in the shape of a new Government. Labour has made no secret of its desire to improve standards in the private rented sector. When this is dovetailed with the party’s intent to slash residential fuels bills and cut carbon emissions, a reform of the private rented sector’s energy standards is inevitable.   

There’s widespread talk of an EPC of least a C being the new gold standard for landlords to achieve. Currently in England and Wales, private buy-to-lets only have to have an E-rated EPC to be legally compliant, while in Scotland, having an EPC alone is enough.  

All the nations look set for change. Labour will soon release its full Renters’ Rights Bill, which is forecast to contain the requirement for private rentals to have an EPC of C or above by the end of 2028. Whether this will be a phased introduction for new and existing tenancies remains to be seen.  

It’s a similar story in Scotland. The Government here is sifting through the feedback following the consultation process attached to its Heat in Buildings Bill. It would like all private rental properties in Scotland, where a tenancy is new, to have a C-rated EPC by the end of 2028.  

Renters request a C 

Although some landlords may grumble at the toughening up of energy efficiency standards, the byproduct will be appealing to a broad group of tenants. Also detailed in the Handelsbanken Property Investor Report was a growing desire for tenants to live in more sustainable properties.  

In fact, 58% of the landlords questioned had received a request from renters for properties with a C EPC rating. This should come as no surprise as Rightmove recently published the running cost of homes with different EPC ratings. It suggested the average annual energy bill for a home with an EPC rating of C is £1,669, compared to £2,307 for a property with a D rating and £3,292 where the EPC is E.    

Landlords with buy-to-lets currently graded D or E should refer back to the original EPC and any recommendations made by the energy assessor. According to the Energy Saving Trust, the nine most common recommendations detailed on an EPC are:   

1. Switch the lighting to LED 

2. Insulate the hot water cylinder 

3. Install heating controls 

4. Replace boiler with a new condensing boiler 

5. Replace single glazed windows with double glazing 

6. Install or upgrade the loft insulation 

7. Insulate the floor 

8. Install wall insulation 

9. Install solar panels   

Lack of action may create a legal issue

Sadly, many landlords fail to take eco action if they don’t have to. When questioned for the latest English Housing Survey 2022-2023 energy report, 73% of tenants who remembered seeing an EPC with energy efficiency recommendations said their landlord had failed to make any of the improvements listed. This is something forward-thinking landlords need to revisit, especially if the new legal minimum in private renting rises to a C .  

If you’re struggling to interpret an EPC, need advice regarding the most impactful energy efficiency changes or would like to order a new EPC, please get in touch.