Energy Performance Certificates: Are they driving landlords out of the sector?
Energy Performance Certificates: Are they driving landlords out of the sector?
Energy Performance Certificate (EPC) regulations have become a key concern for landlords and letting agents. But are they forcing landlords out of the market?
Labour has proposed a significant shake-up to the rental sector. By 2030, all privately rented properties must meet a minimum EPC rating of band C. According to the Labour government, these regulations aim to take more than a million renters out of fuel poverty, ensuring that additional costs are not passed onto the renters. Landlords who fail to meet this requirement won’t be able to rent out their properties.
These regulations risk encouraging landlords to leave the sector as expensive upgrades are required to meet these new standards. According to Goodlord’s 7th annual State of the Lettings Industry report, 52% of landlords stated that increasing their property standards would be a reason to leave the sector.
Here is everything letting agents need to know about future regulations and impacts on the sector.
- The impact of EPCs on the private rental sector
- How much would it cost to upgrade a property?
- What will change under a Labour Government
- What is the future of EPC regulations?
The impact of EPCs on the private rental sector
EPC regulations are creating growing concern within the private rental sector. The upcoming changes to the energy efficiency standards required for rental properties are expected to significantly impact both supply and demand. According to Goodlord’s State of the Lettings Industry report, many landlords unwilling to upgrade their properties may choose to sell up instead.
Only 29.5% of landlords report that more than half of their properties meet EPC band C. However, if they do not make the necessary upgrades, they won’t be able to rent out their properties after the 2030 deadline.
These concerns are echoed across the industry, with 61.1% of landlords and 57.7% of letting agents agreeing that higher EPC standards will negatively affect the rental market.
Want to explore the data behind EPC regulations? Download the report now
How much would it cost to upgrade a property?
Letting agents are increasingly worried about the financial impact of these upgrades. Nearly a fifth of landlords with non-compliant properties said they’re unwilling to invest in the required improvements, as stated in Goodlord’s State of the Lettings Industry report.
Research by Zero Deposit suggests that around 2.68 million UK homes need upgrades, which cost an average of £9,000 per property.
However, there’s a clear discrepancy between what’s needed and what landlords are willing to invest. According to Goodlord’s State of the Lettings Industry report, most landlords are only willing to spend an average of £2,400 to meet the EPC band C requirement.
Only 4% of landlords surveyed are prepared to invest over £10,000.
This mismatch raises serious questions. If landlords are unwilling or unable to invest in the necessary upgrades, many may leave the market sector rather than face the costs.
Letting agents must be aware of this growing issue, as it could lead to a shrinking rental stock, impacting tenants and the industry.
What are Labour promising for EPC regulations?
Labour’s response to the EPC regulations is the Warm Homes Plan, introduced during their September 2024 conference. As Energy Secretary Ed Miliband outlined, the plan promises "warmer homes, lower bills, and lifting over one million people out of fuel poverty."
The plan includes a Warm Homes: Local Grant to help private landlords fund EPC upgrades. This grant will begin delivery in 2025 to English private landlords who have tenants on low incomes or properties rated EPC D to G. Landlords must also agree to the following conditions:
- Agree to have their details stored on a central database.
- Partake in surveys or evaluations conducted by the Department for Energy Security and Net Zero.
- Confirm that any grant assistance will not exceed the cap of £315,000 over three years, as per the Minimum Financial Assistance threshold.
A limited amount of funding is available for local authorities. It will be determined subject to the spending review and confirmed by the Department for Energy Security and Net Zero soon.
However, only certain areas in England will receive funding for this grant. Letting agents can find out which areas are eligible for funding and more information on the grant on the government website.
What does the future hold for EPC regulations?
Labour plans to open the application window for the Warm Homes initiative in October 2024, though the exact date is still to be confirmed.
Additionally, the Department for Energy Security and Net Zero is launching a consultation in the same month aimed at improving EPC accuracy and reliability.
