Landlords across England, Scotland, and Wales could face an enormous £24 billion cost to retrofit properties in line with government energy efficiency standards, according to a new report by property software platform Reapit.
The report estimates that bringing all private rented sector (PRS) properties up to an Energy Performance Certificate (EPC) rating of C will cost an average of £10,000 per landlord. The financial strain is already a cause for concern, especially for smaller property owners, as highlighted by a recent survey from bridging finance broker Finbri.
Smaller Landlords Fear Rising Costs
Finbri’s survey found that 76% of property investors are concerned about increasing costs driven by inflation, while 71% worry about rising energy prices. These financial pressures are compounded by the prospect of complying with new EPC regulations. Labour’s proposal, backed by Ed Miliband, would require all PRS properties to meet EPC C standards by 2030.
Stephen Clark from Finbri noted that while many landlords understand the importance of reducing carbon emissions, the regulations pose a significant burden. “The new EPC requirements will likely cost thousands of pounds per property, adding strain to smaller landlords. The obvious outcome could be higher rents, which is never good news for tenants,” he said.
Financial Burden Too High for Some Landlords
Steve Richmond, general manager at Reapit, warned that for some landlords, especially those outside of high-value areas, the cost could be overwhelming. “Our estimate of just over £10,000 per landlord might be feasible in the South East or London, but for a small flat in Newcastle upon Tyne, that figure could represent 20% of the property’s value,” Richmond explained.
A survey commissioned by Energy UK found that 35% of respondents were unable to afford the upfront costs required to improve energy efficiency in 2023, highlighting the financial hurdles many landlords face.
Risks to the Private Rented Sector
Beyond the immediate financial concerns, Richmond warned of long-term consequences for the private rental market. Britain has some of the oldest housing stock in Europe, making retrofitting for energy efficiency especially challenging. Richmond cautioned that properties unable to meet the new EPC standards could be forced out of the rental market altogether, exacerbating the UK’s housing crisis.
“If we lose these properties because they can’t be upgraded, we risk reducing the housing stock in the PRS by over 17%, which could drive rents up by 3% on top of existing increases,” Richmond said. “Simply selling off inefficient properties won’t solve the issue, as it shifts the problem to new owner-occupiers while further heating up rents on the remaining stock.”
Calls for Government Support
To prevent a potential exodus of properties from the rental market, Richmond urged the government to collaborate with landlords, offering a combination of grants and tax incentives to ease the financial burden of energy efficiency improvements.
“Banks could also play a role, allowing landlords to borrow against the value of the property for energy retrofits without increasing monthly mortgage payments. The property’s value would rise post-retrofit, helping offset the cost,” he added.
As the 2030 deadline approaches, landlords and policymakers alike will need to find a balanced solution to avoid worsening the housing crisis while still meeting crucial environmental targets.