Minimum EPC deadline may move but landlords want certainty

Aug 31, 2023 | Articles, Partners, Property

Across the UK, landlords have already begun preparing for the rise in minimum EPC standards that they expected in 2025. Now, following comments from Michael Gove, there may be a delay in that deadline.

For many, the proposed delay is not the desired solution to the frustrations with the EPC legislation. Instead of more time to prepare, property owners are calling for more consideration of the unique difficulties of achieving energy efficiency.

Meanwhile, as more and more private landlords leave the market, it seems that minimum EPC ratings are another factor making owning a rental property less attractive than ever.

 

What is an EPC?

An EPC or Energy Performance Certificate is a letter grade showing the energy efficiency of a property.

Grades are from A to G, from the most efficient to the least efficient. Since 2010, homes have been given an EPC when they are first built or sold. This certificate lasts 10 years.

A property’s EPC is based on a number of factors including the amount of energy the property uses per m² and the level of carbon dioxide emitted in a year. A property’s lighting, insulation and heating all contribute to its efficiency. Assessors convert these factors into a score called SAP points, and the EPC is based on a score out of 100.

Read more about EPCs, including ways to improve your property’s rating, here.

 

What is the proposed minimum EPC?

Private landlords were expecting to have to bring their domestic properties up to an EPC grade of C by 2025 for new leases and 2028 for existing leases.

There are an estimated 2.4 million rental homes in the UK which don’t currently make the grade.

However, Housing Secretary Michael Gove recently suggested relaxing that timeline. In an interview with BBC Radio Four’s Today programme, Gove said ‘There is a particular pressure that’s being placed on the private rented sector… I think that we’re asking a little too much of them and therefore we will give them a greater degree of breathing space.”

A government figure then confirmed that the housing department was considering a pushback of the EPC deadline.

 

Who is criticising the minimum EPC for private landlords?

The move has garnered criticism both from environmental think tanks, who are concerned that the government is not doing enough to ensure it meets minimum sustainability standards, and from within the private housing sector.

The lack of certainty about when these standards will be enforced is a major concern for many landlords. Upgrading a home, particularly a period property, to meet the new minimum efficiency standards will be costly and time-consuming. The longer landlords are left unsure of their deadline the less time they will have to make the necessary alterations and the more expensive they will become.

UK property consultancy Fisher German has called for more certainty regarding the regulations. In conversation with Property Industry Eye, Fisher German partner Neil Hogbin explained ‘We all want to see properties as energy efficient as possible, but the sector needs certainty about how and when this will happen.

Landlords are looking for a financial package to support improvements in the private rented sector but, it is all still very unclear.  Meanwhile, the owner-occupied housing sector has no minimum energy efficiency requirements at all.

Many of the EPC changes are simply not practical, affordable, or wanted by many tenants – particularly those in period properties.’

My Property Box Managing Director Ben Quaintrell is also critical of the new minimum EPC levels, believing them to be poorly thought out and unfair to those who own older properties.

Speaking with Letting Agent Today back in April, he said ‘I urge Michael Gove to reform the EPC system in an equitable, realistic, and workable manner which recognises the huge variety in the age and construction methods, together with the rental value, and estimated cost of retrofitting properties.

Otherwise, it is simply impractical to bring many up to an EPC C rating and there will be an exodus of investors from the rented sector.’

 

What are the alternatives to meeting the minimum EPC?

With a deadline extension not yet announced, landlords must decide if they want to try and meet the new standards or not. If not, they face limited options.

One option is selling the property and leaving the rental market entirely. The same energy efficiency standards do not apply to owner-occupied homes, skipping the need for a refit. However, properties with an EPC grade of D or below will be less appealing to other landlords.

With the number of available properties plummeting and average rents climbing, more landlords leaving the market could make the existing rental supply crisis even worse.

Ultimately, it seems that many landlords are happy to contribute to the UK meeting net zero goals, but that bringing all rental properties up to a minimum EPC rating of C is neither practical nor affordable for many.

When it comes to reforming the legislation, consideration for properties where the recommended upgrades are impractical or impossible would go further to help than more time to make impractical alterations.

In the meantime, we can only wait to see how the government proceeds. Do you expect to see the new minimum EPC enforced by 2025? Would raising your property’s EPC grade be enough to encourage you to sell? Join the conversation with the links below.

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