Rents will rise thanks to EPC rules, say landlords

Over half of landlords said that they will pass at least some of the costs that it will take to improve their properties’ energy efficiency rating onto their tenants.

Landlords reckon it will typically cost £5,900 to improve their properties, though so far landlords who have upgraded their homes have spent £8,900 on average.

Shawbrook noted, in its Confronting the EPC Challenge report, that wider market issues such as labour and material shortages could also cause landlords’ final bills to rise.

The government plans to make it so landlords have to bring properties up to an EPC level of C for new tenancies by 2025 or 2026, as well as for existing tenancies by 2028.

Emma Cox, managing director of real estate at Shawbrook Bank, said: “Landlords will need to strike an important balance when it comes to making the necessary energy efficiency improvements to their properties. While work needs to be carried out quickly to prevent any void periods during a tenancy, having a clear plan in place as to how they will fund any necessary works is crucial. Our research has shown that landlords may be underestimating the costs involved, leaving them open to unexpected bills.

“As a result, tenants could be caught in the crossfire as landlords seek to recoup some of the costs. While tenants can expect to benefit from cheaper energy bills as a result of greater energy efficiency, any savings on bills could be outweighed by a market wide rent rise in 2025.”

The one positive for renters is more energy efficient features can lower bills, through better insulation, energy-saving appliances, heating controls and energy-efficient windows.

On the flipside the escalating cost of energy – with the energy price cap increasing by 54% in April –may swallow up some of these savings.

Cox added: “For landlords unaware of the level of work that may be needed on their property, or properties, as well as any associated costs, speaking to a mortgage broker or lender sooner rather than later could help to paint a clearer picture. Understanding when they need to begin works to meet the proposed deadline will allow landlords the opportunity to fully assess their options and funding requirements.

“Landlords have a key part to play in the drive towards a greener future for the UK. While challenges and questions still remain, bringing the wider market together to educate landlords and support tenants during the process will help to mitigate some of the upcoming challenges.”

Comments 3

  1. Of course landlords will pass the cost of complying with EPC regulations onto tenants just as with the cost of every other regulatory change hailed as a “victory” for tenants. Otherwise they go out of business, not good for tenants!

    With EPC ratings it is the cheaper stuff like light bulbs, loft insulation and draft proofing and not having a truly ancient boiler that save the most money. Most homeowners and landlords will have done this already. Every further step up the EPC ladder involves costs out of proportion with the savings to be made. So many actual home owners have stopped there (somewhere within D) out of choice. So, unless for the sake of fairness and consistency (two words unknown to the Government in relation to the PRS) all home owners are also compelled to take the next EPC upgrade steps, tenants should be given a choice.

    Every rental property could be provided with a yearly energy cost figure. The prospective tenant could judge this against the rent being charged. The market would balance out. As more new properties with higher EPC ratings became available landlords with lower EPC would potentially have to reduce rent costs to stay tenanted unless they too upgraded and moved into the higher rental band which would be their choice.

    When push comes to shove most tenants will opt for the cheaper rent. Energy costs can be offset just by not using it, but there is no such way to bring an extra £890/Yr rent down (typical EPC upgrade cost of £8,900 amortised over 10 years, would be even more if a loan were being repaid or if landlords chose the more normal 5 year business amortisation period).
    I don’t think landlords will rush to upgrade EPC ratings in advance, they will wait and see. If suddenly millions of homes are untenable what will happen? Having said this, the Government is currently seizing property bought legally (but maybe immorally) by people they have taken a dislike to. They don’t seem to like private landlords that much either, do they?

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