As a landlord, staying ahead of regulatory changes is essential in protecting your investments and ensuring compliance. One of the most significant potential shifts in the private rented sector relates to the minimum Energy Performance Certificate (EPC) rating required for rental properties. The UK Government has proposed raising the minimum EPC rating from an E to C, with phased deadlines for compliance.
This blog explores what these proposed changes could mean for landlords, how EPC assessments may evolve and the key factors to consider when preparing for the future.
HOW EPC RATINGS MAY CHANGE
At present, EPC ratings are heavily influenced by energy cost. Since gas is roughly a quarter of the price of electricity, properties heated by gas often receive a more favourable EPC rating than those relying on electric heating, even if they have higher carbon emissions.
However, the proposed changes suggest a review of the EPC rating system, shifting the focus toward carbon emissions rather than purely energy costs. This means:
- Properties with lower carbon emissions (such as those using heat pumps or renewable energy sources) could receive a better EPC rating, even if their energy costs are slightly higher.
- Gas-heated properties may no longer have an advantage in future EPC assessments.
- While cost will still be a factor, it will not be the sole determinant of an EPC rating but this means the current EPC reports will be turned on their head.
- How the EPC assessments are carried out will need to change and likely need to be more in depth. This means new qualifications for assessors which will likely slow the process down and inevitably increase the cost of the report.
What Are the Proposed EPC Changes?
Housing is responsible for about 25% of energy use and with increasing pressure for housing to reduce its contribution to greenhouse gas emissions, the Ministry of Housing Communities and Local Government and the Department for Energy Security and Net Zero, have opened a consultation to discuss reforms to the energy performance of buildings.
Currently, landlords must ensure their rental properties have a minimum EPC rating of E. However, the government has suggested tightening these requirements. The proposed timeline for implementation is:
- 2028: All new tenancies must have an EPC rating of at least C.
- 2030: All existing tenancies must meet the C standard.
This means landlords may need to make energy efficiency improvements to their properties in the coming years to remain compliant.
Financial Considerations & Exemptions
One of the biggest concerns for landlords is the cost of compliance. Estimates suggest that upgrading a property to meet the EPC rating of C could cost between £6,100 and £6,800 per home, though this will vary depending on the work required.
There is also the possibility that EPCs will expire earlier than the current 10 years meaning they will need to be done more frequently, adding to the costs for landlords.
Exemptions Register & Spending Thresholds
For landlords who find the cost of improvements too high, an exemptions register will remain in place. However, significant changes may be introduced:
- The spending threshold is expected to increase to £15,000 from £3,500. This is a major concern, particularly for landlords in areas with a lower rental income, as it means a significant investment that could be more than a year’s rental income.
- Currently, exemptions last for five years, but this could be extended to ten years, giving landlords more flexibility if they genuinely cannot meet the new standards.
Potential Increase in Non-Compliance Fines
Currently, landlords who fail to comply with the Minimum Energy Efficiency Standards (MEES) can be fined up to £5,000. However, under the proposed new rules, this penalty could increase to £30,000, a substantial fine that makes compliance even more important.
Availability of tradespeople- With so many rental properties currently below an EPC rating of C, a key question is whether there will be enough qualified tradespeople to carry out the necessary work. If the demand for retrofitting services significantly increases, this could lead to delays and potentially higher costs.
What Should Landlords Do?
v Assess Your Properties: Take a look at your current EPC to check its rating. If it is below a C are there any relatively easy options to implement to increase the rating? However, be wary about your projects as remember, there is a chance the EPC reports will change.
v Plan Ahead for Upgrades: Making incremental improvements over time can help spread the cost and prevent last-minute stress. Prioritize cost-effective upgrades such as insulation, efficient heating systems, and double glazing.
v Stay Informed: These proposals are not yet law, but staying up to date with government announcements will help you prepare effectively.
v Seek Expert Advice: Consulting with energy assessors and property professionals can provide tailored guidance on cost-efficient ways to meet future requirements.
Final Thoughts…
I know what you are thinking.
This feels like another blow for landlords and the private rented sector which has faced a number of changes in regulation and compliance recently. Locally we have noticed many landlords leave the market and we understand why. However having an investment property in my opinion, is still a good investment. You just need to get your ducks in a row.
And this is where we come in.
Our comprehensive management service will take the stress out of being a landlord and will ensure you and your property are compliant. So in a time where things are changing regularly, it’s a no brainer to have us as your agent. For more information, get in touch with your local branch today.
Disclaimer: The information in this blog is based on current proposals and may be subject to change. Always seek professional advice for your specific circumstances.
