Private landlords across England and Wales could be hit with a staggering £21.6 billion bill to comply with Labour’s new energy efficiency standards, according to property consultancy Knight Frank.
Under the new Minimum Energy Efficiency Standards (MEES), announced last week by Energy Secretary Ed Miliband, all private rental properties must achieve a minimum Energy Performance Certificate (EPC) rating of C by 2030, an upgrade from the current minimum of EPC E.
A Knight Frank analysis of over 31,000 private rental sector (PRS) properties found that, on average, improving a home to an EPC C rating requires 2.2 energy efficiency interventions. The cost of these upgrades varies depending on factors such as property size, age, and current efficiency levels.
Costs of Compliance
Data from Knight Frank suggests that upgrading a typical PRS property to an EPC C rating would cost an average of £8,148. For properties currently rated D, the cost is estimated at £5,841, while properties rated F would require around £14,107. The most expensive improvements would be for homes rated G, which could face costs exceeding £18,000.
Housing type also plays a role in costs, with flats requiring an average of £5,869 for improvements, compared to £9,410 for houses. The government’s proposed cost cap for landlords is currently set at £15,000, though a consultation is underway to potentially lower this to £10,000 for those qualifying for an ‘affordability exemption.’
With around five million households in the PRS and 60% of them rated EPC D or below, the total cost of compliance is projected to reach £21.6 billion. This sum is equivalent to more than five years’ worth of rental income for affected properties, excluding other associated costs.
Industry Concerns
Flora Harley, head of ESG research at Knight Frank, warned that landlords face a tough decision. “This policy is not new, but this time it requires a firm government commitment, including both incentives and enforcement. Past initiatives have seen limited uptake, and concerns over insulation quality may further undermine confidence. A clear, well-thought-out approach is needed, along with accessible financing options.”
Harley also noted that rental supply has already declined significantly, with 34% fewer homes available to rent compared to pre-pandemic levels. “The new MEES rules could further shrink supply, as landlords must choose between costly upgrades or leaving the market. In the long term, newer energy-efficient properties will likely become more attractive to investors compared to older, non-compliant stock.”
Financial Support and Labour Shortages
The government currently offers financial incentives, such as the Boiler Upgrade Scheme (BUS), which provides grants of up to £7,500 for replacing fossil fuel heating systems with heat pumps or biomass boilers. While heat pump adoption in the UK has lagged behind other countries, 2024 saw record installations, with nearly 40,000 BUS redemptions since May 2022. However, this remains well below the government’s target of 600,000 heat pump installations per year by 2028.
A separate challenge is the shortage of skilled workers to implement energy efficiency improvements. The Green Jobs Taskforce estimates that an additional 230,000 trained professionals will be needed by 2030 to retrofit buildings across the UK.
To address funding gaps, the Green Home Finance Accelerator (GHFA), a £20 million government initiative, aims to develop new financial solutions for homeowners looking to improve energy efficiency.
Calls for Greater Support
Gary Hall, head of lettings at Knight Frank, stressed the need for government support. “Landlords are already navigating evolving regulations, and many struggle to turn a profit. Without clear guidance and financial aid, making substantial improvements will be difficult.”
Hall suggested tax breaks for energy efficiency improvements could incentivize landlords while helping the government meet its energy targets. “Improving EPC ratings benefits everyone, but it shouldn’t come at the cost of rental availability. We must encourage investment in the sector rather than drive landlords out,” he said.
As the deadline for compliance draws closer, landlords face mounting pressure to upgrade properties, while policymakers grapple with balancing environmental goals and rental market stability.