Research on EPC's
New research suggests that some landlords are now deliberately choosing to buy properties with weak EPCs to upgrade and benefit from capital appreciation.
Research by specialist lender Landbay suggests that 7 out of 10 Buy To Let landlords are aware of government proposals that all rental properties must have an EPC rating of A, B or C - that awareness is particularly strong amongst portfolio landlords. The research also reveals that 68 per cent of the landlords surveyed had properties with an EPC rating of D, E, F or G. However, the majority of those - 4 out of 5 - intend to bring their properties up to at least a C rating. The current proposals (widely expected to become law) are that new tenancies must be C rated by 2025 and for existing tenancies by 2028.
Landbay says landlords are now beginning to see these changes as an opportunity: 53 per cent of portfolio landlords owning 10 or more units said they would consider buying homes that were D rated or lower and bring them up to at least a C rating.This compares to 32 per cent of portfolio landlords with 4 to 10 properties who would do the same, but only 20 per cent of non-portfolio landlords would choose to buy and upgrade.
Buying properties and making them more energy efficient will raise the value of the property and the rental income landlords can charge, as well as reducing tenant’s energy bills. The government initiative is to make homes more energy efficient and reduce carbon emissions to be net zero by 2050.
There are challenges along the way - domestic energy use accounts for 14 per cent of overall UK emissions and 90 per cent of homes in England currently use fossil fuels – improving the energy efficiency of the nation’s housing stock is one of the most significant challenges in reaching net zero emissions.The private rented sector has its part to play, but in recent years, landlords have faced considerable legislative change. And during a time of financial strain due to the Covid-19 pandemic, which will continue to have lasting effects, the costs of bringing housing stock up to EPC Band C will be a significant challenge.
The ratings and how they are calculated are under review and I suspect we may get new guidance at some point to help government hit its targets - which at the moment it has no chance in achieving. A lot of spend on D & E ratings may not be required and any new measures could be more forgiving in certain areas, but we need to know what they are first.
We are definitely heading into a world where fossil fuel is going to be replaced by alternative forms of energy, but it's not going to happen overnight. The current energy crisis is hitting everyone hard in the pocket, the Russian invasion of Ukraine has added to the pressures with a typical household bill now predicted to hit £3,000 per annum. As landlords we can do our part by having the vision to go greener and make our investment homes for our tenants more energy efficient. I suspect that some landlords already wished they had, especially for those who have HMO's and the R2R model must also be a worry about given the spiralling cost of electricity and gas supply.