Over half of landlords said that they will pass at least some of the costs that it will take to improve their properties’ energy efficiency rating onto their tenants, according to new report Confronting the EPC Challenge from Shawbrook Bank.
With landlords having to make improvements to their properties ahead of the proposed 2025 deadline, tenants could soon see their rents rise as landlords start to consider how much the required works will cost. When asked how much they believe they would need to spend on making the necessary improvements, landlords estimated that it would cost £5,900 on average to improve their properties.
However, this figure could be significantly underestimated as landlords who have already made improvements to their properties have spent £8,900 on average to date. Wider market issues such as labour and material shortages could also cause landlords’ final bills to rise.
Tenants in London are most likely to see these costs passed onto them with 68% of landlords in London saying they’d pass at least some of the costs on to their tenants in a bid to recoup the cost of carrying out the improvement works.
Whether landlords put up costs initially or not, many expect rents to rise as a natural consequence of the new regulations. Nearly a fifth (18%) of landlords expect this to be the case. However, tenants living in energy efficient properties can expect lower energy bills as a result of more energy efficient features within the property such a better insulation, energy-saving appliances, heating controls and high-performance windows.
Emma Cox, Sales Director at Shawbrook Bank, comments:
"Making changes to a property’s EPC rating can be a long and daunting process. With the announcement of proposed new legislation making it mandatory for EPC ratings to be improved before the start of new tenancies, from 2025, landlords shouldn’t delay in taking steps now. Speaking to a mortgage broker or lender sooner rather than later can provide landlords with a much clearer picture of what the legislation could mean for their property, or portfolio of properties.
“Our research has shown that landlords may be underestimating the costs involved, leaving them open to unexpected bills. Brokers have a unique role to play here in supporting them to navigate the financial side of making the changes, recommending timescales for work to take place as well as suitable products such as bridging - a product range that could prove critical in supporting investors and landlords in the short term. Concerns around void periods and a loss of rental yield can put landlords off from beginning improvements works but the market is starting to adjust with incentives already emerging. We can expect to see more of this in the coming months and years as focus increasingly turns to the hugely important green agenda. Clearly this is something we should all embrace, and we must work collaboratively to overcome any associated challenges”.
Download Confronting the EPC Challenge
Research Methodology
*Shawbrook Bank contracted Opinium to undertake research between 18th and 25th November 2021 to understand landlords awareness of the upcoming changes to the Energy Performance Certification (EPC), which will require properties to be rated ‘C’ or above by 2025 in order to begin a new tenancy. A total 1,000 UK landlords were surveyed.