The government’s Plan for Change strategy means landlords have until 2030 to ensure their rental properties achieve an EPC rating of C, causing some to doubt their future in the sector.
The Labour government has now confirmed the deadline for upgrading rental properties’ Energy Performance Certificates (EPC) to a rating of C, as well as a maximum spending cap of £15,000.
By 2030, all rented homes will need to achieve this new level of energy performance, a significant increase on the current minimum, an E rating. It means that properties falling below this benchmark by the deadline could be deemed unrentable and fines issued.
As a result, the buy-to-let market has become even tougher, particularly given the recent changes to Stamp Duty charges.
The cost to landlords
To boost a property’s EPC rating, landlords can do several things, including installing insulation, upgrading heating systems or fitting renewable energy solutions.
However, these changes come with a cost, a figure that has inflated in recent years due to rising prices for materials and labour.
This is leading some landlords to consider their future in the rental sector: “The costs landlords are facing to bring EPC ratings up to the mark is bringing the viability of ownership as an investment into question,” commented Oliver Prior, National Commercial Director of Auction House.
“Those who are already highly leveraged and have been squeezed by the increase in mortgage rates over recent years and the change in Stamp Duty are likely to be the most impacted.”
What happens next?
Now that the requirement has been confirmed, landlords should be proactive and implement change as early as possible.
Properties with better EPC ratings can make them much more appealing to renters, allowing landlords to charge higher rates. There are already signs that high energy costs are prompting tenants to be choosier, something that landlords could capitalise on if they upgrade now.
Investors are also more likely to be interested in a higher-rated property should the landlord choose to sell in the future. Newer builds and those that have already been upgraded have been shown to gain more interest.
If upgrading isn’t cost-effective, landlords may choose to exit the market sooner rather than later.
In these cases, auctioning the property is a great option. “Vendors can sell their properties with tenants in situ, which means they will benefit from the rental income up until completion, in addition to taking advantage of the security and speed of sale under the hammer,” explains Oliver Prior.
