A recent government consultation has highlighted that landlords may face difficult decisions in response to the UK’s upcoming EPC reforms, with some potentially choosing to sell their properties or pass on costs to tenants. The consultation, detailed in the Improving the Energy Performance of Privately Rented Homes: Impact Assessment, examines the wider effects of the government’s plan to ensure all private rented sector (PRS) properties reach EPC C standards by 2030. In addition, the government is introducing reforms to the way EPCs are measured, replacing the current single cost metric with four headline metrics, including energy cost, fabric performance, heating system efficiency, and smart readiness.
Landlords could exit the market
According to the consultation, landlords’ reactions to the new regulations may vary considerably. Some may decide that upgrading their properties to meet EPC C standards is financially unviable and opt to sell instead. The report references the impact of previous EPC changes, where properties rated EPC F or G, which were required to reach EPC E, saw reductions in value of between £5,000 and £9,000 compared with unaffected properties.
The document notes:
“Landlords may decide to exit the market. The likelihood of this is dependent on the current profitability of their rental property, the level of costs they face, the price landlords would receive from the sale of their property and their wider financial circumstances. … Landlords who face the highest costs may decide, on balance, it is still less costly to sell their property than comply with the higher energy performance standard.”
Other landlords may choose to invest in improvements and continue renting, particularly if the upgrades can make their properties more attractive to tenants or provide long-term cost savings. The government acknowledges that different landlords will take different approaches, influenced by the size of their portfolios, property types, and financial flexibility.
Passing costs onto tenants
The consultation also suggests that some landlords may seek to recover the cost of energy-efficiency improvements through higher rents. However, the scope to do this is limited by tenants’ ability to pay. In 2023–24, almost a third of private renters reported struggling to afford their rent, and with slower wage growth and rising rents in recent years, the potential for landlords to transfer costs may be restricted.
Nevertheless, the government expects that tenants could benefit from lower energy bills due to the improved energy efficiency of their homes, which may make them more accepting of modest rent increases. The report explains:
“Tenants may be more willing to accept an increase in rents in exchange for lower energy bills. This is dependent on the level of costs passed through to rents as well as the tenant’s ability to accurately compare the trade-off between the rise in rents and expected energy savings.”
This introduces a complex dynamic between landlords and tenants, where the financial burden of compliance may be partially offset by reduced utility costs, creating a trade-off that could influence rental decisions and tenant satisfaction.
Changes to EPC measurement and reporting
Alongside the 2030 EPC C target, the government is reforming the methodology used to calculate EPC ratings. The single cost metric currently in use will be replaced with four headline metrics: energy cost, fabric performance, heating system efficiency, and smart readiness. These changes aim to provide a more holistic assessment of a property’s energy performance, reflecting not only the cost of improvements but also broader environmental and technological factors.
However, the consultation notes that uncertainty remains around how landlords will respond to the new metrics. Fabric-based measures, such as insulation improvements, are expected to closely align with the final EPC calculations, while smart and heat metrics—which focus on solar panels and heat pumps—may produce more variable results depending on the property and installation approach.
Additionally, changes in market adoption of specific energy-efficiency measures before the regulations take effect could influence the overall impact of the rules. For instance, insulation is often installed alongside general renovation works, solar PV panels are increasingly adopted without government incentives, and heat pumps are expected to play a central role in the decarbonisation of the housing sector in the coming years.
Impact on construction demand and costs
The consultation also highlights that upgrading properties to meet EPC C standards is likely to overlap with work required to comply with the Decent Homes Standard. This could create additional demand for skilled construction workers, potentially increasing wages for tradespeople and adding to the cost of compliance for landlords. Such pressures may be more pronounced for older or more complex properties, where substantial retrofitting is required.
The government acknowledges that these reforms will require significant investment from landlords but argues that they will also deliver long-term benefits for tenants, including lower energy bills, improved comfort, and reduced carbon emissions. At the same time, the consultation recognises that landlords will need clear guidance, practical support, and timely access to funding to make the transition feasible without creating undue disruption to the rental market.
Balancing objectives and practical challenges
Ultimately, the consultation underscores the challenges of balancing ambitious energy-efficiency objectives with the realities of the rental market. While the government seeks to improve the sustainability of privately rented homes and reduce tenants’ energy costs, the potential for landlords to leave the market or pass on costs to tenants illustrates the complexity of implementing these reforms. Clear guidance, financial support, and phased implementation will be essential to ensure that the 2030 EPC C targets are achieved without negatively affecting rental supply or affordability.
The document makes it clear that the outcome will depend on a combination of factors, including landlords’ financial circumstances, tenants’ willingness to pay, and broader market conditions. By addressing these considerations early, the government aims to create a framework that supports both sustainable housing and a stable rental market over the next decade.
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