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Don’t Kick The Can Down The Road When it Comes to EPC Changes

Peter Hemple looks at the rising demand for improving energy efficiency in the home

Demand for heat pumps has spiked by 20% since the start of the year as consumers race to get ahead of spiralling energy costs, according to data from Rated People, a platform that connects homeowners with local tradespeople. The firm reported on 18 April that it had logged a 20% increase in the number of users requesting heat pump installers in January 2022 compared to the same month last year. Meanwhile, demand for cavity wall insulation – one of the quickest and most effective measures to cut heating bills – also jumped by 20% over the same period, the company said.

However, regardless of what happens to the cost of oil, gas and electricity over the next few years, demand for home improvements that improve the EPC (Energy Performance Certificate) rating of a home will keep rising, and most likely so will the cost, which is something that all landlords with rental properties that have a rating below C need to be aware of.

Regulations requiring all rental properties to have an EPC rating of C or above for new tenancies come into force on 31 December 2025, before extending to include all (existing) tenancies by 31 December 2028. This has significant financial ramifications for buy-to-let landlords, who are now required to carry out renovations to ensure their properties meet the legal requirements by the set deadline or face the prospect of not being able to let their properties to new tenants.

The new rules, which are part of the government’s long-term plans to reach its ‘net zero’ carbon emissions target by 2050, are likely to have a major impact on both existing and future landlords as well as the UK’s housing supply. It may lead to some landlords selling because they cannot afford to, or are unable to raise the finance to, make the necessary improvements. Also, as outlined later in this article, it has already led to more landlords only looking to buy properties that already have a C rating or higher, in order to avoid carrying out improvement works. Tenants are also likely to feel the brunt of the changes as some landlords look to finance future EPC improvement costs by increasing rents now.

Despite these impending changes, recent research conducted by Shawbrook Bank has found that one in seven (15%) private landlords admit they are unaware of the proposed EPC changes and the 2025 deadline. Another poll, conducted by The Mortgage Works, found 35% of landlords did not believe they would be able to bring their properties up to the required EPC standard by the given deadline.

Estimates on the size of the problem vary
Shawbrook Bank says that 23% of landlords surveyed said that their properties were rated D or below. However, the number could be higher with a further quarter (27%) of landlords admitting they don’t currently know the EPC rating of their properties. Older homes are more likely to have a lower EPC rating and require improvement, so it was no surprise that 30% of landlords with Victorian era properties in their portfolio said they were rated D or below.

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