According to research from Pegasus Insight, this marks a trend reversal, as previously, tax and interest rates were cited as key concerns for landlords.
The government is currently working on energy performance legislation that could mandate a minimum Energy Performance Certificate (EPC) rating for rented properties, with a proposed spending cap of £10,000.
A consultation was opened by the Department of Energy Security and Net Zero (DESNZ) to explore proposals to raise minimum energy-efficiency standards for private rented homes in England and Wales by 2030 earlier this year.
Proposals included whether EPC rules should be extended to short-term lets and if new exemptions should be introduced. The feedback is still currently being analysed.
Pegasus Insight found that 56% of landlords have property with an EPC rating of D and 20% have property with a rating of E, F or G.
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Approximately 42% of landlord portfolios do not currently achieve an EPC of C or above.
More than three-quarters of landlords with 11 or more properties have on average 9.2 properties that have an EPC rating of D or below.
Mark Long, founder and director of Pegasus Insight, said: “Energy-efficiency rules are now a decisive factor in landlords’ business decisions. With around half of rental stock still below the target EPC threshold, the cost and complexity of upgrades are prompting many to rethink their portfolios.
“This is a pivotal moment for the sector: the ambition to improve energy standards is welcome, but without clearer guidance and practical support, there’s a real risk that good landlords will simply choose to exit the market rather than invest.”
