Do EPCs save the planet or are they just another way of hammering landlords?

This Property118 investigation looks at how much energy performance certificates (EPCs) could cost the PRS and whether EPCs save tenants money or whether they are simply a green tax.

A recent report by The Times revealed the staggering inaccuracy of the certificates used to rate the energy efficiency of homes.

It highlighted research conducted by technology company CarbonLaces that shows EPCs overestimate energy use by an astonishing 344%.

The study found the lower EPC rating, the bigger the overestimation. For properties with the worst rating of G, the EPC estimates these properties use 656kWh/m2/yr. Yet their smart meters show they use only 151kWh/m2/ per year – a 344% gap.

The study compared the EPCs of more than 17,000 homes with their actual use, as logged by smart meters.

The research revealed that the average metered gas and electricity use for all properties was 125kwh per square metre a year – 91% lower than indicated by EPCs.

Widespread uncertainty in the PRS about what is expected from landlords

Though the plans have not been made into law, ministers have previously proposed that by April 2025, newly rented properties in England and Wales will need to meet a minimum EPC standard of C – tougher than the current E standard. The regulation is also slated to apply to existing tenancies from 2028.

Findings from Foundation Homes Loans revealed 66% of landlords said they were aware and understood the plans, 25% said they did not understand the details, and 9% were not aware at all.

A consultation on new EPC and minimum energy efficiency standards (MEES) requirements ended two years ago.

The government has given no response to it, leading to widespread uncertainty in the PRS about what is expected from landlords.

Rodney Townson, from landlord association group iHowz has been writing to ministers since 2021 urging them to publish the new EPC and MEES requirements for the PRS.

He warns there is a danger for landlords making improvements to their property to meet current EPC standards, only to find the work won’t meet the new EPC standards when they are finally published.

He said: “Taking out electric heating to replace with gas is good for the current EPC mechanism (gas is cheaper to run than electric), but almost certainly will be wrong for the new EPC (gas produces more carbon than electric).

“As a result, many landlords are reluctant to carry out anything beyond draft proofing and window/door replacement.”

Energy Assessment survey is not free

Since 2008, all rental properties in England and Wales have required an EPC. The certificate gives detailed information about the property’s energy efficiency and carbon emissions.

To receive an EPC, you must have an Energy Assessment Survey carried out at your property which costs £70.

The areas the inspector will assess include:

• Windows
• Roofs, walls and insulation
• Boilers and heating systems
• Renewable energy devices such as solar panels
• Lighting
• Fireplaces
• Building dimensions and age.

Eye-watering £25 billion

Based on data from lender Octane Capital, an estimated 1.6 million of England’s 4.9 million PRS homes are C or above. This means that 3.4 million homes are below C and need to be upgraded.

Calculations from mortgage broker Habito on the cost of upgrading homes from D to C are roughly as follows:

• One bedroom flat £3,500
• Mid-terrace house £6,400
• Larger detached house £12,500.

Averaged out, this puts the cost of an upgrade at roughly £7,466. Multiplying this by 3.4 million homes and there is a total cost across England of an eye-watering £25 billion.

What’s more, this is only a conservative figure, as it is based on merely an upgrade from D to C, leaving out the E to G properties.

‘Cannot accept landlords being penalised for not meeting EPC requirements’

A cross-party group of MPs and peers has suggested that landlords who don’t upgrade their properties should be liable for mortgage penalties.

The All-Party Group on a Green New Deal believes there should be a 1% mortgage interest rate premium levied on all buy-to-let properties with an EPC below C which would be fully refundable if the standard were reached within three years.

Mr Townson of iHowz said of the proposals by the all-party group: “The government is still to publish the requirements of the new EPC, and of the new MEES.

“We cannot accept landlords being penalised for not meeting their proposed energy saving requirements until the government confirms their requirements for landlords.”

Under current government regulations, landlords are not expected to spend more than £3,500 on upgrades to meet the current EPC requirements for a rating of E.

However, proposed changes could see all rental properties requiring an EPC rating of C by 2028, and a potential increase of this cap to £10,000, meaning landlords could be required to spend more just to meet minimum requirements.

Calls for more financial support for the PRS to meet EPC targets

Landlords and agents have called on the government to provide more financial support for the PRS to meet EPC targets.

In 2022, Propertymark wrote to the Department for Business, Energy and Industrial Strategy calling for a package of financial and taxation incentives to support landlords to get their properties up to EPC targets.

Some of the incentives included:

• Reduction in VAT for energy efficiency measures or incentives for landlords and home buyers through stamp duty.
• Reintroduction of the Landlords Energy Saving Allowance (LESA), which let landlords claim on their income or corporation tax return against the cost of buying and installing certain energy saving items.

In the written submission, the industry body said: “Our primary concern is that many landlords will exit the sector with the supply of PRS housing being further constricted and housing options for predominately the most vulnerable being reduced.

“The cost of up to £10,000 will be challenging for all types of landlords especially those with small portfolios and those landlords with properties with low house price values.”

‘Landlords have spent thousands of pounds upgrading homes’

Mick Roberts, a landlord from Nottingham, told Property118: “Many landlords have spent thousands of pounds upgrading homes and we don’t even know what’s what yet due to the uncertainty around the new EPC targets.”

He said a lot of properties may need £30,000 spending on them just to get to band C.

“I’ve got to start telling tenants soon, ‘You can’t live here past 2028, the government say you can’t if the property is not a C, and your rent doesn’t pay for a C’.”

Matt Copeland, head of policy at National Energy Action, said: “There has never been a more important time to upgrade the energy efficiency of our housing stock.

“It is crucial that private renters, who are more likely to be in the deepest fuel poverty, aren’t left behind.”

The campaign group would like tax exemptions to help landlords make the required adjustments to their properties to help meet EPC standards.

Mr Copeland added: “While tighter minimum standards and larger cost caps need to be part of this, it’s important that these come with complementary measures such as tax exemptions and interest free loans to help a landlord make the required adjustments.”

80-year-old woman evicted from her home due to not passing EPC standards

It’s not just landlords who are struggling with EPCs, many tenants are also facing the burden.

In a report from BBC’s East Midlands Today, an 80-year-old disabled woman is being evicted from her home of 62 years due to her property not passing new EPC standards.

Thoresby Estate ,which owns Anne Marsh’s property in Nottinghamshire, said it is no longer viable to rent out and has given her two months to move out.

Anne told the programme: “I’ve been here 62 years, why do I want to go anywhere else?”

A spokesman for Thoresby Estate told the programme it deeply regretted the situation, but new energy performance certificate rules make it no longer viable to rent out houses like Anne’s.

In reality, while EPCs may look good on paper, the entire system seems to be broken, with a big disconnect between grades and a property’s actual energy requirements.

Landlords across the country will face having to pay thousands of pounds just to upgrade their properties and many will be left questioning whether it is worth it. And the big worry for tenants is that many of those landlords will not think it is worth the outlay and leave the PRS – and the tenant having to find somewhere else to live.

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