The government has told landlords to improve the Energy Performance Certificate (EPC) ratings of their rental properties to a C rating or above by 2030.
These new energy regulations have sparked “significant worry” among landlords, according to a new survey by Shawbrook.
Many of the landlords’ concerns surround the cost of the energy improvements to their properties.
In addition, a quarter of those landlords said they are “feeling very concerned” about the new requirements.
In some cases, it means landlords may be forced to sell up and leave the sector if they cannot afford to cover the costs of carrying out the energy improvements.
Mind over mortgages: why we need to look after intermediaries’ mental health
Sponsored by Halifax Intermediaries
A total of 29% of landlords believe they won’t be able to afford to complete the required energy upgrades without financial support from the government.
Cost of new energy targets for rental properties
The cost of any improvements is the main concern for these landlords.
A further 16% said they would struggle to afford the costs, and 25% said they plan to sell the properties that would require upgrades.
However, some landlords have already started to make investments in their properties prior to the new regulations being introduced.
A total of 21% of landlords said they have made some changes to their properties to increase their EPC rating to C ahead of the previous government scrapping the targets last year.
Meanwhile, 22% said they have undertaken upgrades and their properties are now rated C or above.
Professional portfolio landlords are more likely to have already made upgrades to their properties, according to the research.
A quarter of landlords with four or more properties within their portfolio had made changes prior to the targets being scrapped.
By contrast, this applies to 17% of landlords with between one and three properties.
Previous research by Shawbrook conducted in 2022 found that the majority of landlords had been on the path to improving their properties prior to the government changing its stance.
More than half – 54% – of landlords had made at least some efficiency improvements in the first half of 2022, prompted by growing demand from their tenants amid rising energy costs.
However, with the 2030 target never confirmed and eventually scrapped by the previous government, some landlords held off or paused investment plans for their properties. They still have steps to take to reach a C rating.
Shawbrook suggests that, with the country facing another winter of rising energy costs, tenant demand for energy-efficient properties is likely to rise again.
However, the cost of materials and labour has increased in the past two years, making improvements more expensive.
Costly renovation projects
Shawbrook said the new EPC regulations have sparked significant worry among landlords, with over three-quarters – 78% – saying they are a concern and a quarter of those feeling very concerned.
Emma Cox, managing director of real estate at Shawbrook, said: “Our experience has shown that landlords overall are motivated to improve their properties.
“In 2022, we saw many take steps to do so, both in response to demand from their tenants, and the then targets from the government.
“However, when these targets came into question, at a time of significant economic headwinds, many chose to hold off on costly renovation projects.
“With these targets back in place, landlords now must play catch-up.”
She added: “It’s encouraging to have greater clarity from the government, which will allow landlords to put in plans in the run-up to 2030.
“But with just over five years left to comply, it’s clear that landlords will need support to get there, both from the government and the industry.
“When you consider the housing stock in the UK, much of which was built prior to 1950, the extent of the challenge is clear.”
According to the English Housing Survey, 12% of the private rented sector is currently rated E-G.
Cox concluded: “Having a quality, energy-efficient, professional private rented sector is critical, particularly at a time when homeownership and access to affordable housing remains challenging.
“But this must be achieved with the support from government and industry.”
