It is over two years since the government completed its consultation on improving energy efficiency in the private rented sector. The consultation document promised to report back in Spring 2021 and put forward regulations the following Autumn.
I took part in the helpful hour on Talk TV recently and a desperately anxious landlord called up about having to get her property up to EPC C before the deadline in 2025. Many landlords approach me at events with similar concerns. The consultation document said that they would have to contribute up to £10,000 per property at a time when many are struggling with vastly increasing mortgage payments. The NRLA has pointed out that the average net earnings of landlords is £4,400 per annum and that government wrongly believe that landlords have oodles of spare cash. NRLA research also tells us that 68% of landlords are less likely to buy a property for investment if it has an EPC rating lower than a C. Half of landlords said that they were considering selling properties that have an EPC of D or lower. The truth is we still have no idea what the new regulations are. The government has yet to respond, creating an information vacuum that is causing planning blight.
And the 2025 deadline for getting properties for new tenants up to EPC C looks increasingly unrealistic.
What on earth is happening? The NRLA has called for government to provide a definitive timetable for publication of a response and extend the compliance deadline for all tenancies to 2028. It would also like the works contribution that landlords make taper from £5,000 to £10,000 depending on average local rents. After all, they vary hugely between different regions. The NRLA would also like to see a package of fiscal measures to support works. Currently, these could be deemed to be capital improvements, which can only be set against profits when the property is sold. A new tax allowance or different treatment of these costs is imperative to help support energy efficiency improvements.
47% of landlords had already undertaken energy efficiency improvement works by Spring 2021. But the scale of the problem is huge. According to the English Housing Survey, only 44.5% of PRS properties currently have an EPC of C or higher. And there is a particular problem in the PRS – a third of the properties are pre-1919, which compares to 10% in the owner occupier sector and 5% in social housing. For many investors, improving their properties is fraught with difficulties. Take my portfolio for example. I have mostly purchased wrecks at auction and refurbished them with double glazing, combi boilers, LED lighting, loft insulation and thermostats on radiators. They are mostly Victorian terraced houses, some in conservation areas. My EPCs tell me that they will need big ticket items like internal or external wall insulation, solar panels and more energy efficient heating like air source heat pumps. But the very expensive combination of all three may still not get D or E rated properties up to an EPC of C.
