Landlords face retrofit dilemma as energy efficiency deadline looms: Martese Carton

In line with their 2050 net zero ambitions, the government has proposed key deadlines for, initially landlords, but eventually all homeowners, to bring their properties up to minimum standards of energy efficiency.

The proposed changes to Buy-to-Let Energy Performance Certificate (EPC) legislation is intended to kick-start the retrofit of UK stock. The government wants homes in England and Wales to reach a minimum EPC level of ‘C’ by 2025 for any new rental homes in the Private Rental Sector and by 2035 for all homes.

At present, in England only 42 per cent of assessed homes currently reach C or above.

Unfortunately, despite making these ambitions public, the legislation proposed initially for the Private Rental Sector has yet to be passed. However, this delay, against a back-drop of political uncertainty, rising energy prices and soaring interest rate increases means there has been little incentive for landlords to kick-start the retrofit revolution.

But whilst around 85 per cent of the public believe that climate change is an important issue, only 35 per cent have adopted, or are planning to adopt, energy efficiency measures anytime soon.

And the costs of meeting the Government’s targets are enormous. According to the excellent ‘Net Zero Homes Report’, published in November last year by UK Finance, it is estimated that it will cost UK homes approaching £300 billion to reach the required EPC ratings.

However, landlords are already reacting to the planned legislation. Many view the proposed minimum EPC standards as another tick-box in the long list of legislation they need to adhere to allow them to let their property. This means landlords are likely to be weighing up if the cost to improve the property is worth it, or whether selling off problematic properties before the legislation comes into force is a better option.

Recent research by BVA/BDRC in conjunction with the National Residential Landlords Association found that over half (54 per cent) of landlords who are looking to sell their properties in the next 12 months would consider selling a property of theirs with an EPC rating of D or below.

The prospect of landlords selling off properties does not solve the key issue of net zero and the need for retrofit of existing UK stock. Instead of sparking a retrofit revolution, the proposed regulation could simply push the problem into the residential space for some 10 years down the line. The result is continued carbon emissions and resulting impacts on our environment.

Whilst in the short term selling and replacing stock might be the easiest approach, in the medium to longer term, retrofitting lower EPC rentals could become the most economical option again.

Landlords can act now to improve the energy efficiency of their properties to benefit them, their tenants, and the environment.

Martese Carton is Director of Mortgage Distribution at Leeds Building Society