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Lender innovation is needed as the clock ticks for landlords on EPC ratings – Rowntree

by: Richard Rowntree, managing director of mortgages at Paragon Bank
  • 21/05/2021
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Lender innovation is needed as the clock ticks for landlords on EPC ratings – Rowntree
I read with interest proposals from The Lettings Industry Council (TLIC) to the Ministry of Housing, Communities and Local Government (MHCLG), with regard to plans to increase the minimum energy rating for private rental properties by 2025.

 

The body, which represents the UK’s largest lettings agents, has called for a more staggered approach to improving energy standards in the private rented sector (PRS) than those put forward by the Department for Business, Energy and Industrial Strategy (BEIS).

The latter has proposed that all new tenancies must have an energy rating of at least C by 2025. By 2028, that would apply to all tenancies. 

The fact that the body has written to the MHCLG, which is responsible for housing stock, and not BEIS, is interesting in itself: perhaps it highlights how government doesn’t work in complete harmony. But the points made by TLIC are valid. 

The window to 2025 is very short, particularly given the pressures landlords have endured because of coronavirus, and could threaten stock levels, which are already under strain given record levels of tenant demand. 

Under TLIC’s proposals, all tenancies would have an EPC rating of C by 2030 – only two years later than the BEIS proposals – and improvements would be phased. This a sensible approach that recognises the need to improve the carbon footprint of the sector, whilst acknowledging the damage that inflexible proposals could cause. 

The direction of travel for the PRS and landlords is clear. The government has targeted housing as a key component of its net zero carbon emission goals, and the rental sector is first in line of sight. Whether it’s 2025 or 2030, we’re still standing on a burning bridge. 

Landlords cannot ignore this, but let’s not forget the good work already done by this group. According to the government’s statistics, the number of PRS homes in England and Wales with an EPC of C or above has increased by 272 per cent over the past 10 years, as landlords have invested in newer, more energy efficient homes or upgraded existing stock.

However, that leaves around 2.8 million PRS homes still with an EPC rating of D or below, equating to approximately six in every 10 homes. 

Landlords will need finance and innovative solutions. I expect to see more products come to market from lenders in the coming months and years, and I expect government to come up with a longer-term replacement to the Green Homes Grant. 

We have made a start in this area with the launch of our 80 per cent LTV rates for properties with an EPC rating of A to C, encouraging landlords to invest in more energy efficient stock.

We recognise more needs to be done and we will be looking at what else we can do to further support landlords to drive energy improvements.

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