Supply in the rental market faces a new challenge as close to a quarter of landlords say their properties are currently rated D or below for energy efficiency according to a new report Confronting the EPC Challenge from Shawbrook Bank.*
23% of landlords surveyed said that their properties were rated D or below, however, the number could be higher with a further quarter (27%) of landlords admitting they don’t currently know the EPC rating of their properties.
Older homes are more likely to have a lower EPC rating and require improvement. 30% of landlords with Victorian era properties in their portfolio said they were rated D or below.
Under proposed regulations landlords may be required to make changes to their properties to improve the energy efficiency by 2025 for all new tenancies. This means bringing their property’s EPC rating up to a C or above. For existing tenancies landlords have until 2028.
For landlords with older properties making these improvements could be a costly exercise.
Indeed, currently two in ten landlords don’t have the necessary funds required to begin refurbishments of their properties. This is particularly the case with older landlords - those aged over 55. A quarter of this group said they don’t currently have the funds available to make changes to their properties to bring them in line with the new requirements.
Should landlords be unable to make changes to their properties by the proposed deadline they may be unable to rent their properties and could therefore be left with properties that are unmortgageable and therefore unsellable. This could limit supply in the market, at a time when many are reliant on the Private Rental Sector (PRS).
Many landlords are yet to make changes to their properties. The English Housing Survey found that there has not been an increase in energy efficiency among housing stock in the PRS over the last year - despite an increase in housing stock in England overall.
In order to make changes in time for the proposed deadline, landlords have expressed the need for support from the government and industry. Close to half of landlords said they would benefit from guidance on what the EPC legislation means specifically for landlords, while 37% want to see incentives to make changes such as favourable borrowing rates.
A third of landlords surveyed called for guidance on timings on how to phase the implementation of changes, and 29% wanted to see signposting to suppliers who could help them make improvements to their properties. The same proportion also wanted to receive guidance on how to manage tenants during the improvement process.
Landlords were also interested in speaking with other landlords about the issue, with 21% looking for a shared space to discuss problems and share solutions. In response to this, Shawbrook has established a working group of industry professionals, landlords and policy makers together to find possible shared solutions to the challenge.
Emma Cox, Sales Director at Shawbrook Bank, comments:
“We have uncovered a knowledge gap for many landlords when it comes to the proposed EPC regulations. Many are unsure of the changes they need to make to their properties, what this might cost, and what the impact will be to their tenants. It’s clear from our research that landlords are looking to the industry for support in this matter, something we believe we can help with.
“While no one is contesting that these changes are important, it’s also imperative that landlords are supported so that they can make these changes as efficiently and cost-effectively as possible. With the costs of labour and supplies rising landlords could find themselves facing significant expense in order to make the necessary changes. And those with older properties could be looking at significant works in order to bring their EPC ratings up to C. Bridging finance could be a useful tool for those landlords needing to make changes, without using their own finances for the improvements, and brokers are in a unique position to help their clients by making sure they are aware of the various finance options available to them.
“As an industry we need to come together to support landlords so that they have both the resource and guidance to undertake improvements ahead of the proposed deadline. We hope that our forthcoming working group will provide a space for landlords, brokers and the wider industry to share ideas and solutions to confront this challenge, and we look forward to sharing the findings, and the ways we may be able to support, over the coming weeks and months.”