While this is later than the current 2030 target, improvements are being made faster than in 2016, when Hamptons predicted it would take 89 years to upgrade homes.
Last week, it was announced that Labour would be reintroducing mandated targets to improve the energy efficiency of privately rented homes. This comes after the previous Conservative Government scrapped the target that would have seen privately rented homes raised to a minimum EPC rating of C by 2028.
Hamptons said the faster rate of energy-efficiency upgrades was partially down to landlords attempting to meet the original deadline set by the Conservative Government.
So far this year, Hamptons has found that 39% of EPC assessments carried out on rental homes had seen the property move into a higher band. While this is higher than the long-term average, the rate of improvements is slower than the years leading up to 2018, when the requirement to reach an EPC rating of at least E was introduced.
To meet the proposed 2030 target, around 340,000 rental homes will need to be upgraded every year until the deadline and achieve a rating of at least C. Approximately 115,000 homes will need to make sufficient improvements to achieve an EPC C rating this year, meaning the rate of upgrades will need to increase threefold each year until 2030.
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Most homes improved to minimum standard
Some 55% of privately rented homes that had a new EPC certificate this year achieved a rating of C or better, compared to 48% of owner-occupied homes.
Most of these higher ratings were from rental homes moving from a D rating to a C, as half of the homes that were previously rated D went on to achieve a C rating.
Meanwhile, 29% of homes that had an EPC rating of C were later rated a C or above. Just 9% of homes that were previously rated C went on to achieve a rating of B or higher.
Shifting goalposts for landlords
Aneisha Beveridge, head of research at Hamptons, said: “Successive changes to proposed energy-efficiency rules have shifted the goalposts for landlords, some of whom face costs [that] can run into tens of thousands of pounds. Despite this, many investors have continued to improve the energy efficiency of their rental homes, and we’re currently on track to see 100% of rental homes where an EPC A-C is viable reach that rating within a generation.
“To meet the Government’s 2030 target, the same number of homes will need to see energy upgrades over the next five years as we’ve seen make improvements in the last 30 years. While a requirement for all rental homes to achieve an EPC A-C rating by 2030 is achievable at a stretch, landlords need adequate time and resources to meet it. It is essential landlords receive complete clarity on this target this year.”
Higher yields on lower EPC-rated homes
According to data from EPCs carried out so far this year, 3-4% of rented homes will be unable to achieve an EPC rating of A to C. However, this was higher than the 7% of homes that were not expected to reach this level before changes were made to the EPC methodology in mid-2022.
The new assessment reduced the assumed environmental impact of electrical appliances, in some cases pushing homes heated by electricity into higher bands than gas-heated homes. This also means EPC ratings based on assessments conducted before 2022 are subject to change.
Homes with lower EPC ratings and properties unable to achieve an EPC rating of at least a C tend to be older, cheaper and likely located in the North of England, Hamptons found.
This explained why the average EPC D-rated home achieved a gross yield of 7.6% in 2024, the firm said, outpacing the 5.5% yield achieved on the average EPC A-rated home, and these latter homes tend to be newly built.
Homes with an EPC rating of E achieved the highest average yields of 7.9%.
Hamptons said landlords who owned these homes would hit the spending cap before the proposed target. It said the value of these properties and the way they have been built means an EPC C rating was often “unviable” and, in some cases, “unobtainable”.
There is a significant drop in the average annual running cost of a rental home rated EPC D, which stands at £1,482, and a home rated C, which stands at £983.
Between EPC ratings C and B, this falls to £711, but the average running cost rises again to £1,046 for homes rated A.
Rents continue to rise
The Hamptons data found that the average rent for a newly let property in Britain increased 5.7% year-on-year to £1,354. The firm said this was the 12th month in a row in which the annual pace of growth had not risen.
The firm said this was boosted by double-digit growth in the North, where rents rose by 10.3% to an average of £942.
The slowest pace of rental growth was recorded in Outer London, where there was a 2.9% rise to an average rent of £2,203 per month.
The rate of rental growth has slowed for larger properties but accelerated for smaller rental homes. Hamptons found that the average rent for a one-bed home rose to £1,092 per month in July, up 7.6% compared to the same time last year.
Meanwhile, the average rent for a three-bed increased 5.2% and the average rent for a four-bed rose 3.8%. The average one-bed property now costs the same amount as the average two-bed did back in September 2022, Hamptons said.
Beveridge added: “Rental growth continues to outpace inflation, despite the pace of growth moderating over the last year. However, there are also signs that the large increases in stock levels since 2023 are beginning to subside. In January, stock levels were up 34% year-on-year, a figure [that] is now 22%.
“A fall in stock levels is likely to reignite the pace of rental growth, particularly given that, longer term, there are around a third fewer rental homes than there were five years ago.”
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Rental homes to miss 2030 EPC deadline at current pace – Hamptons
