Landlords across the UK are bracing for increased costs after the government reinstated plans to enforce stricter energy efficiency standards for rental properties.
Under new regulations set to take effect from 2030, all rental homes will be required to have a minimum Energy Performance Certificate (EPC) rating of C, an increase from the current minimum rating of E. The move is aimed at reducing tenants’ energy bills by improving property efficiency, but it could impose significant financial burdens on property investors.
The government estimates that the average cost for a landlord to upgrade a rental property will range between £6,100 and £6,800. However, energy data firm epIMS suggests the real figure could be much higher. With the average landlord reportedly holding a portfolio of eight properties, and the cost of upgrading each sub-C-rated home estimated at £8,000, total investment costs could reach £64,000 over the next five years.
Craig Cooper, chief operating officer at epIMS, warned that the mandatory upgrade requirement could drive landlords out of the sector. “The worry is that forcing a mandatory EPC C rating on the nation’s landlords could cause more to exit the sector, exacerbating the current rental crisis in the process,” he said.
The National Residential Landlords Association (NRLA) has echoed concerns about the financial strain on landlords and called for additional government support.
“We all want to see rented homes as energy efficient as possible, but that will require a realistic plan to achieve this,” said Ben Beadle, chief executive of the NRLA. “The chronic shortage of tradespeople to carry out energy efficiency works needs to be addressed, alongside a targeted financial package to support investments in the work required, as called for by the Committee on Fuel Poverty and Citizens Advice.”
Understanding EPC Ratings
An Energy Performance Certificate (EPC) provides a property with a rating from A to G based on its energy efficiency, with A being the most efficient. All homes listed for sale or rent must have a valid EPC, offering prospective tenants and buyers an estimate of energy costs.
Currently, rental properties in the UK must have an EPC rating of at least E. Plans to increase the minimum to C were scrapped by former Prime Minister Rishi Sunak in October 2023. However, the Labour government has revived the initiative, arguing that improved energy efficiency will lower tenants’ bills and potentially increase property values.
How Landlords Can Improve EPC Ratings
The Department for Energy Security and Net Zero (DESNZ) has outlined various measures landlords can take to meet the new requirements. These include installing loft insulation, cavity wall insulation, and double glazing before considering additional upgrades such as solar panels, smart meters, or battery storage.
A maximum spending cap of £15,000 per property will be imposed, meaning landlords will not be required to invest beyond this amount. Some may also qualify for exemptions, which could lower the cost cap to £10,000 based on factors such as rental income or council tax band. Financial assistance may be available through the Boiler Upgrade Scheme and Warm Homes: Local Grant.
With over 2.5 million privately rented homes currently below the required C rating, landlords face a daunting task. However, Cooper noted that achieving compliance may be easier than anticipated.
“An EPC rating is calculated using a points-based system, and some properties may be just one minor improvement away from achieving a C rating,” he explained.
For instance, an A-rated home requires between 92-100 SAP points, a B rating requires 81-91 points, and a C rating falls within 69-80 points.
“This is important knowledge for landlords because a property with a D rating could be just one point away from reaching a C, requiring only a small upgrade,” Cooper added. “There are several cost-effective measures, such as installing photovoltaic panels instead of expensive insulation, that could significantly improve a property’s EPC score.”
Experts advise landlords to consult accredited energy assessors to determine the most effective and economical improvements to meet the new standards. With the deadline fast approaching, many property owners will need to act swiftly to ensure compliance and avoid potential penalties.