What the energy efficiency drive means for UK property rentals

The rising cost of living in the UK has led to a greater emphasis on energy efficiency in the private rented sector, according to recent research[1].

The study revealed that 58% of renters are now less inclined to consider a property with a low energy rating of D or below, motivating 54% of landlords to make efficiency upgrades in the past half-year. Additionally, 63% of landlords have brought forward upgrades due to high inflationary pressures. However, despite government proposals to mandate energy performance certificates (EPC), the study found that knowledge on the subject is limited.

While 78% of landlords have heard of the proposals, over a third only know ‘a bit’ about them, and 75% of mortgage brokers worry their clients are not sufficiently informed. If tenants feel their accommodation is more cost efficient and sustainable, they will be more likely to stay, which in turn will benefit landlords.

PROPOSED EPC REQUIREMENTS

A quarter of landlords (26%) have already made energy efficiency improvements to reduce energy bills for tenants and to meet proposed EPC requirements. The research also found that landlords have spent an average of £8,900 so far on improvements – which is almost 50% more than they had expected they would need to spend. However, 22% of landlords say they have no idea how much updating their properties will cost.

When it comes to the energy efficiency changes tenants would like to see made to a property, solar panels are the most popular choice, with 26% of respondents stating that they would like them to be installed. A further 22% would like a new boiler, and 20% stated that double glazing would be their preference. Nearly a fifth of tenants (17%) said they would even consider living in a smaller property if it meant it was more energy efficient.

REDUCING ENERGY CONSUMPTION

The latest figures come as the government has pledged to reduce energy consumption from buildings and industry 15% by 2030, with aspirations for properties to have a minimum EPC rating of C in England and Wales by April 2025. Under current government regulation, landlords are not expected to spend more than £3,500 on upgrades to meet the current EPC requirements for a rating of E.

However, proposed changes could see all rental properties requiring an EPC rating of C by 2028, and a potential increase to this cap to £10,000, meaning landlords could be required to spend more to meet minimum requirements.

MEETING COMPLIANCE ACROSS PORTFOLIOS

As future legislation could see landlords unable to take on new tenants or face fines if they fail to comply with the changes, it prompts a need for further education across the sector to ensure landlords understand their role in meeting compliance across their portfolios, and the associated costs.

It’s likely that efficiency standards will become tougher in the future, which is just one of the reasons that landlords should take note of tenant’s requests and start making a plan. As trends now point towards tenants favouring more energy efficient properties, these changes should not just be seen as a tick-box requirement by landlords, but also a worthwhile investment.

Don’t forget, our professional friendly advisers are on hand to support you and can help you explore all of your options. 

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