But many landlords could exit the market because of the burden of EPC improvements
The majority of landlords are making efficiency improvements to their rental properties, as renters are much less likely to consider inefficient homes with low energy performance ratings, the latest research from specialist lending bank Shawbrook has found.
Nearly three in five (58%) renters said they would be less likely to consider renting a property with an energy rating of ‘D’ or below – prompting more than half (54%) of landlords to make efficiency improvements in the last six months. Nearly two-thirds (63%) have brought forward upgrades because of sharp inflationary pressures.
The findings – drawing on views from tenants, landlords and mortgage brokers – are part of Shawbrook’s second report on the government’s proposed changes to energy performance certificate (EPC) requirements for rented homes.
Although the plans have not yet been put into law, it’s widely expected that landlords will have to meet a minimum EPC standard of ‘C’ for all newly rented properties in England and Wales by April 2025. The measure would apply to existing tenancies from 2028.
Read more: Could low EPC rated homes become a ‘hot potato’?
Despite the impending regulatory changes, Shawbrook’s research showed that a significant knowledge gap remains. While over three-quarters (78%) of landlords said they have heard about the EPC proposals, more than a third know only ‘a bit’ about the changes. Three-quarters (75%) of mortgage brokers are concerned their buy-to-let clients don’t know enough.
There are also concerns that many could exit the market, with significant effects on the availability of properties. Nearly two-thirds of landlords say they could sell their properties in the next five years because of the burden of EPCs, while nearly two in five brokers with buy-to-let clients have seen them exit the market rather than make energy efficiency improvements.
Read more: The push to hit EPC rating ‘C’ – who will pay the price?
“Whatever happens with the government’s proposals, it’s clear that landlords need to be thinking about making energy efficiency improvements to safeguard their rental properties,” Emma Cox (pictured), managing director of real estate at Shawbrook, said. “As well as the need for clarity from policymakers, the industry has a significant role to play in supporting landlords.
“As a specialist lender, Shawbrook has been developing finance discounts to help landlords improve their properties – rewarding those with properties that are up to standard and incentivising those who need to make upgrades.”
Shawbrook is offering an energy efficiency discount for new buy-to-let mortgage customers of up to 60bps on their arrangement fee for properties with an EPC rating of ‘A’, ‘B’, or ‘C’. For new mortgages on properties where the EPC rating improves to at least a ‘C’ during the term with Shawbrook, customers can apply for a partial refund of their arrangement fee, plus the cost of the new certificate up to £100.
Read more: Buy-to-let mortgages: Are they still worthwhile?
Shawbrook also has plans to roll out further support for landlords needing to make improvements to their properties in the coming months as part of its commitment to support them on their journey to becoming more energy efficient.
“We’re committed to building on the findings of this research – and the conversation around it – to develop new solutions to drive the sector forward,” Cox said.
