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Quarter of landlord homes have sub-standard energy performance rating

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Written by: Anna Sagar
07/02/2022
A quarter of landlord properties have an Energy Performance Certificate (EPC) of D or below, and many are unaware of upcoming legislation requiring new tenancies to have a rating of C or above by 2025.

The average cost for landlords to improve their property’s efficiency is around £5,900 but the growing cost of labour and materials means the figure could be higher, according to a report from Shawbrook Bank.

It added that to date, landlords have spent an average of £8,900 to improve their properties, which is 50% more than expected.

This could mean landlords may not have the necessary funds to complete works needed to get a property up to an EPC rating of C – a regulation coming into effect from 2025 for new tenancies, and 2028 for existing tenancies.

As such, more than half of landlords said they would pass on some of the cost to the tenant, but this could disproportionately impact some areas.

For instance, 68% of landlords in London said they would consider this despite rents in London currently averaging £1,589 per month.

This was followed by North West and West Midlands where 59% of landlords respectively said some of the cost of improvements would be passed on to tenants.

Landlords in the East of England were least likely to push costs to tenants at 38%.

Overall, 18% of landlords expect rents to rise due to improved EPC ratings, resulting from lower energy bills because of energy efficient features.

Lack of awareness

The report also found there was a lack of awareness among landlords around proposed legislative changes, or what their EPC rating was.

One in seven private landlords said they were unaware of the proposed EPC changes and the 2025 deadline, and just over a quarter said they had little to no knowledge of the changes.

It continued that 27% of landlords did not know their EPC rating and a quarter of landlords didn’t know what level of work would be needed to get their properties to a C rating.

However, nearly half of landlords would like to see guidance around what new EPC legislation would mean for them, and over a third wanted further guidance on timings and advice on how to implement changes.

The report also found that 37% would like the wider industry to introduce incentives such as favourable borrowing rates to help implement necessary changes.

Older housing stock more expensive

Updating properties is worse for owners of older housing stock as they are more likely to have poorer EPC ratings and will need more money to improve.

The research showed that 36% of current properties in the private rented sector were built before 1940. Around 40% of landlords in London, South West, Scotland and Wales said their properties were built prior to 1940.

Proposed EPC changes have also impacted buying decisions, with a quarter of landlords saying they would avoid buying a property with a low EPC rating and 30% said they would buy a property with a rating of C or higher.

Emma Cox, sales director at Shawbrook Bank, said improving energy efficiency was a “vital step” in reducing negative environmental impacts but it “will not necessarily be a straightforward process for landlords”.

She said this was due to there being a significant proportion of older properties in the UK and lack of awareness about EPC rating.

Cox said: “Landlords will require further support from both the industry and the government in order to make the changes in good time. Indeed, with the cost of labour and supplies rising, it could be a costly exercise for all landlords, but there are solutions available.

“It is in everyone’s interest that properties are made more energy efficient, however this cannot be done half-heartedly, and we must ensure sufficient resources are provided so that landlords can make the appropriate changes to benefit their properties and their tenants.”

She said Shawbrook Bank was launching a working group, which would provide a space for landlords and the wider industry to “share ideas and solutions to confront this challenge”, and it would share its findings in the near future.

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