Easy as ABC? The government’s plan for EPCs in the private rented sector

Easy as ABC? The government’s plan for EPCs in the private rented sector

With every cataclysmic flood across Europe and every woolly rhino uncovered by Siberia’s ever-decreasing permafrost, the need to act fast on climate change becomes clearer and clearer. Happily, the government has realised this too, which is why they’re targeting net zero emissions by 2050. Well done, chaps.

However, the government has a permafrost’s chance in hell of meeting this target unless something’s done about emissions caused by domestic properties. Did you know that 15% of total UK greenhouse emissions come from homes? And that figure rises to 22% when you include electricity consumption. 

Consequently, the government has been taking some important measures to improve EPCs in the private rented sector. The UK’s housing stock is quite a lot older than that of our European neighbours so it could do with an upgrade. In fact, 75% of our homes were built before building regulations even necessitated insulation.

So what, exactly, has the government got in mind? Let’s just say that private landlords are very much in Boris Johnson’s crosshairs again. 

Target practice

We all know that EPCs have been around for years. They’re needed whenever a property is built, sold, or rented. They reveal how much it will cost to heat a home, how to reduce its energy consumption, and how much this will save the occupier in the long-term. Therefore, they’re essential tools that can affect a property’s value. 

The government legislated that all properties in the private rented sector must have a minimum EPC rating of E back in April 2018. New tenancies had to reach that level immediately, while existing tenancies had until April 2020 to make the grade. This put landlords on notice that their properties must reach a minimum standard. 

The only properties exempt from this law were churches – and there aren’t too many of those in the rental sector – or small outbuildings. Listed buildings were also exempt if the changes necessary to improve a home’s EPC changed its appearance. Landlords of all other F or G rated properties had to fork out up to £3,500 to comply. The government covered any additional costs. 

But there’s more…

The latest news, however, is that the government now wants to raise the minimum threshold from E to C. That’s the biggest leap since the one Neil Armstrong took for mankind back in 1969. New tenancies must reach the target by 2025 and existing tenancies by 2028. You can find all the details here on the government’s website.

This new law will no doubt infuriate landlord’s who have only just raised their properties to E. However, the good news is that the overwhelming majority can reach the new standard by making simple changes to their building fabric, i.e. updating windows, doors, and the boiler. Improving insulation is another obvious option for landlords who haven’t quite maxed out the fluffy yellow stuff in the loft. 

The benefits

The obvious winner in all this is the planet. Private rented dwellings are among the least eco-friendly in the UK. Although improvements have been made in recent years, under half of the nation’s rented homes currently have an A to C rating. One could argue, therefore, that it’s about time the sector did its bit.

There’s also some good news for landlord’s wallets – although this might seem counterintuitive at first. Research shows that investing in a property’s EPC can really increase its value. In fact, research shows that properties with an EPC rating of C are worth 5% more than those rated D. Money ploughed into a house to make it more eco-friendly is therefore likely to be repaid. 

Tenants also benefit when a home’s energy performance is boosted. Heating bills will be lower – a big deal for those who are vulnerable or on low incomes – whilst there will be obvious wellbeing benefits, too. Comfort and air quality will improve dramatically for starters. This should keep tenants happy and help landlords to avoid costly void periods. 

The drawbacks

The big problem, of course, is that many landlords simply won’t be able to afford the upgrades necessary. Savills have estimated that it would cost over £17,000 to upgrade some homes from E to C. That’s two or three years’ rent in some cases. What’s more, the government has sneakily moved the £3,500 cap (the maximum amount landlords have to pay) up to £10,000. Hmmm.

The situation has been exacerbated by the government’s decision to scrap the Green Homes Grant back in March. These grants offered vouchers of £5,000 to £10,000 to fund up to two-thirds of a homeowner’s energy efficiency improvements. However, the pandemic, not to mention inherent problems with administration, put paid to that particular perk.

Consequently, asking landlords to cough up considerable costs at a time when Covid-19 and tenant eviction bans have already made life difficult seems punitive. Not all landlords are prosperous property barons with money to burn. Climate change is a serious problem, but why should landlords foot the bill more than most?

The verdict

Whilst sustainability is always desirable – we’re leading the campaign to cut emissions in the domestic property sector ourselves – forcing landlords to raise EPC ratings up to C could prove extremely controversial, especially as landlords could be fined up to £4,000 per property if they fail to comply. Indeed, leading industry voices have already labelled the target “not realistic” and demanded extra support for landlords. 

On the bright side, however, at least the deadline is some way off. The 2025 and 2028 cut-offs give landlords plenty of time to save up, or, if the worst comes to worst, sell their properties. Whether they’ll be happy doing this, however, is another matter entirely. And who wants to see a reduction in the supply of rented accommodation? Certainly not us. Walking this particular tightrope could prove terrifically tricky. 

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