Landlords and EPC targets – Tenants want improved homes but not higher rents

Last week the Prime Minister Rishi Sunak announced plans to scrap energy-efficiency targets for landlords – showing, one organisation says – that the Conservatives are on the side of landlords rather than renters.

However, with the prospect of landlords of not having to spend thousands of pounds to get their properties to EPC C standard, one landlord organisation says we need to be realistic around energy efficiency.

According to data from the Energy and Climate Intelligence Unit (ECIU), the Prime Minister’s U-turn on net zero changes could cost households up to £8bn in higher bills over the next decade.

The organisation warns bills could cost more if gas prices spike again.

The ECIU says they came to these figures by analysing its updated previous research about a government delay to insulating the nation’s homes.

In this data, the ECIU revealed that a government delay to insulation could cost private renters £1bn in energy bills.

Standards of housing in the private rented sector

Jess Ralston, an energy analyst at ECIU, said the delay of green targets will hurt renters.

She said: “This looks chaotic and not the way long-term policy should be made around important issues, with emergency cabinet meetings and investors spooked.

“Quite the opposite of an honest debate, the implication that any of these policies were going to affect the cost of living here and now is untrue.

“In fact, the PM has sided with landlords over renters, putting their energy bills and cost of living up by ducking the improvement of rules on energy efficiency.”

She added: “That doesn’t make any sense when excess cold in homes costs the NHS £1.2bn per year and renters are amongst those with the lowest incomes.

“As the North Sea declines, if the UK fails to shift to heat pumps, we’ll end up reliant on importing ever larger quantities of foreign gas.”

How much energy efficiency requirements will cost for landlords

What the ECIU fails to mention is how much these energy efficiency requirements will cost for landlords and how these costs could be passed onto tenants.

The Prime Minister confirmed the delay of energy efficiency targets warning higher rents will have been passed onto tenants.

He said: “Under current plans, some property owners would’ve been forced to make expensive upgrades in just two years’ time.

“And even if you’re only renting, you’ll more than likely see some of that passed on in higher rents.”

The English Housing Survey for 2021-2022 reveals 19% of PRS homes could cost between £10,000 and £15,000 to improve to at least an EPC rating of C.

A further 5% of homes could require £15,000 or more to improve their energy efficiency.

‘Tenants would like more energy efficient homes’

Mick Roberts, one of Nottingham’s largest landlords, said tenants do want energy-efficient homes but not at an extra cost.

He told Property118: “Tenants would like more energy efficient homes, but not at an extra £300 per month when they are paying £600 for an EPC D property and £900 per month for an EPC C property and new build standards are £1,000pm.”

Mr Roberts says the new green targets would have done more harm to tenants.

He says: “The Prime Minister recognised too many people are going be homeless by the new regulations and more rents spiralling and reduced supply.”

Rodney Townson from landlord organisation iHowz agreed that renters do want energy-efficient homes but targets need to realistic.

He told us: “The recent decision by the government to confirm that they will not be implementing their proposed higher standard of an EPC of C or higher from 2028 and the ban on new gas boilers from 2025, acknowledges that these proposals had become unrealistic – given that the requirement had still not been confirmed, with less than two years to the deadline.

“Landlords are keen to provide homes that are safe and comfortable and will meet the required new EPC requirements, but this will require realistic targets and heating solutions with capital requirements linked to sensible investment payback periods.”

‘Improved EPC ratings are good for both landlords and tenants’

He added: “Properties with improved EPC ratings are good for both landlords and tenants. Not only will they reduce the risk of cold and damp, but they will also reduce the risk of summer heat as temperatures rise.

“This should, in turn, reduce tenant heating bills while boosting rental yields and property values.”

Mr Townson says it is also worth remembering that EPC ratings have improved over recent years.

According to the English Housing Survey, the proportion of A to C rated dwellings increased from 16% in 2011 to 47% in 2021.

While the proportion of the least energy efficient dwellings (E to G) decreased from over a third of dwellings (35%) in 2011 to one in 10 dwellings (10%) in 2021.

One estate agent told the i newspaper that landlords with low EPC rated properties had already decided to sell up.

‘Costs to bring their properties up from D and E ratings’

Patrick Bullick, managing director of Stanley Property, said: “Landlords with lower rated properties were genuinely going to incur extra costs to bring their properties up from D and E ratings.

“These costs can be considerable, and some of those were moved to sell rather that incur yet another cost.”

He added: “It is therefore true that by Mr Sunak not bringing in this improvement requirement rents will be lower than they would be if it were brought in. That is not to say that rents will not keep going up. The shortage of new stock is a key issue.”

Mr Townson says the government must provide more incentives for landlords to improve a property’s energy efficiency rating.

He said: “It is disappointing that the government has taken over two years to provide this clarity, resulting in some landlords selling up as they viewed the capital requirement to carry out the works as unviable.

“iHowz urge the government to provide the much-needed clarity, at the earliest opportunity, on what the new EPC Standard Energy Procedure (SAP) will require and guidance and support for landlords to help reach these standards. The government will need to provide better funding support for landlords, as well as a clear long-term plan for delivery.”

Landlords want to help tenants with energy-efficient property

It’s clear that landlords do want to help tenants by giving them an energy-efficient property, but green targets need to be realistic.

And as the Prime Minister acknowledged, tenants do not want to be paying more for an energy-efficient property in a cost-of-living crisis.

If green targets are to be achieved, then the government must provide better funding for landlords.

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