How Will Raising Energy Performance Certificate Rating Standards Affect Lettings?

Proposals by the Climate Change Committee (CCC), appointed to advise the government on hitting emissions targets, combined with the government’s own proposals could see some big changes in store for the lettings sector. Just over a year since the introduction of new rules demanding all rental properties meet the standards for at least the Energy Performance Certificate band E, there could be a new target to hit within the next five years.

Keep reading to find out what these EPC proposals could entail and what it would mean for landlords and letting agents in the future.

What Are the Possible Changes to Energy Performance Certificate Rating Standards?

The CCC is recommending that all homes achieve a minimum of an EPC band C rating by 2028. This would include social and private rentals, as well as owner-occupied dwellings. In addition, the government suggested in a proposal called Energy Performance of Privately Rented Homes in England and Wales that this rule will also apply to all new tenancies from 2025, less than five years away. The consultation on that proposal closed in January 2021 and is now under review.

In addition, the proposals suggested:

● A raised cost cap of £10,000 from £3,500 per property that landlords will be required to spend on improvements to get their properties as close to the target as possible when there is no funding available.

● Landlords should adopt a ‘fabric first’ approach, meaning they must improve the efficiency of the fabric of the building (insulation etc.) before tackling heat and energy generation.

● Letting agents and online portals must not advertise and let properties that do not meet the new rules.

The government claims the measures will help improve the efficiency of rental homes, the comfort for the tenants and add value to the properties too.

Problems With the EPC Proposals

Landlord groups have picked apart the government’s proposals and uncovered a number of concerns. Expecting landlords to spend up to £10,000 to improve the efficiency of their homes within the next four years is a big ask for any property owner, particularly at a time when many have lost revenue from tenants whose jobs are affected by the Covid-19 pandemic.

The question of whether it will even be possible to improve the efficiency of all private rental properties is also a worry. At present, just 32.6% of rentals meet the requirements for EPC bands A, B or C. Bringing two-thirds of all lettings, around 3.2 million properties, up to that standard in just a few years will be a huge task. A further complication is that, currently, coronavirus restrictions make it more difficult for landlords to invite tradespeople into the properties to conduct improvements in a safe manner.

“If Ministers want to achieve these highly ambitious aims, they need to recognise the challenges the sector faces,' says Chris Norris, policy director for the National Residential Landlords Association (NRLA).

“Over 32 per cent of private rented homes were built before 1919, higher than any other tenure. These are the most difficult to improve.”

There are schemes in place to help landlords improve the efficiency of properties, but industry body Propertymark claims schemes like the Green Homes Grant end too soon and do not go far enough to help landlords across the UK.

Possible Solutions to the Problems

The NRLA suggests a couple of ways that landlords will be able to fund the improvements needed to bring homes up to standard. The association warns that the cost will land at tenants’ doors in the shape of increased rents.

However, another action that could help would be to take measures to increase efficiency tax-deductible. Currently, landlords can only claim the cost of like for like replacements as an expense. If they change an old, outdated boiler for a new, efficient model, they can only claim up to the cost of the old boiler against property income tax. The NRLA claims that it would help landlords modernise quicker if they could claim the whole cost of the new device.

If you want to spend less time getting your head around maintenance and other property management issues, outsource your back-office lettings tasks to us. Contact us today to talk about how we can help.