Landlords face £24 billion bill to retrofit properties to EPC C

Reaching EPC C targets could cost landlords a staggering £24 billion, according to new research.

A report by software platform Reapit reveals it would cost £24 billion to retrofit all PRS properties across England, Scotland and Wales to an EPC C.

The news comes after a survey by Finbri which reveals smaller landlords are worried about the financial costs of EPC regulations.

£10,000 to meet EPC targets

According to Reapit’s analysis, it would cost each landlord £10,000 to meet EPC C targets.

Steve Richmond, general manager, of Reapit warns the cost could be too much for landlords.

He said: “Our estimate puts the cost at just over £10,000 per landlord – perhaps a manageable investment for properties in the South East or London, but it could represent as much as 20% of the value of a small flat in Newcastle upon Tyne.

“It’s not surprising then that a recent survey commissioned by Energy UK revealed that 35% of respondents could not afford the upfront costs to make any energy efficiency improvements in 2023.”

Financial strain on smaller landlords

Another survey conducted by bridging finance broker Finbri reveals that 76% of UK property investors are worried about escalating costs due to inflation, while 71% are concerned about the impact of rising energy prices.

Stephen Clark, from Finbri bridging finance says many smaller landlords are worried about Ed Miliband’s proposal for all PRS properties to reach EPC C targets by 2030.

He said: “Most people appreciate the need to reduce carbon emissions and make properties more energy-efficient, but the new additional EPC regulations will put a further financial strain on smaller landlords in the private rented sector.

“Making necessary improvements to meet the new regulations will likely cost thousands of pounds per property. Meeting the new government’s energy efficiency standards will force property investors to find ways to offset that cost. The obvious outcome could be higher rents, which is never good for tenants.”

Some rental properties may not be able to reach EPC targets at all

Mr Richmond warns that some rental properties may not be able to reach EPC C targets at all.

He said: “Britain has some of the oldest housing stock in Europe, which presents a big cost and viability challenge. We can’t afford to lose properties from the PRS because they cannot feasibly be retrofitted to an EPC C. Doing so would reduce the housing stock in the PRS by over 17%. Reapit has estimated this would add around 3% to rental prices on top of the usual rent increase we are seeing and worsen the housing crisis. The only way to keep those valuable properties in the sector is to sit down with the government and come up with a workable exemption scheme.

“While the overall energy performance of the PRS would look better if landlords simply sold inefficient properties, it obviously won’t reduce emissions from UK housing, as intended by the government. Instead, properties with a poor energy rating will simply become the problem of the next owner-occupier and heat up rents on the remaining stock.”

Mr Richmond adds the government must work with landlords to help reach EPC targets by offering a mixture of grants and tax incentives.

He said: “Banks could allow landlords to borrow against the value of the property for energy efficiency measures. They could even do this without increasing the monthly mortgage repayment, as the value of the property relative to the loan should increase after the retrofit.”

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