A recent survey conducted by a mortgage lender has revealed a concerning trend in the buy-to-let market, with over two-thirds of private landlords reporting that they own at least one property that does not meet the new Energy Performance Certificate (EPC) ‘C’ target. The new EPC standards, which are set to take effect in the coming years, are designed to improve the energy efficiency of rental properties. However, a significant portion of landlords are yet to meet these requirements, raising questions about the wider impact on the rental market and potential costs for landlords who need to upgrade their properties.
The research, carried out by Foundation Home Loans, also sheds light on the level of awareness landlords have regarding these EPC standards. While a strong majority, 92%, of landlords have some awareness of the regulations, a much smaller proportion—only 67%—report having a thorough understanding of the new rules. This indicates that while landlords may know about the changes, many are not fully informed on the specifics, which could lead to confusion and delays in compliance as the deadline for meeting the new standards approaches.
One interesting finding from the survey is the difference in knowledge between different types of landlords. Portfolio landlords, those who own four or more buy-to-let properties, show a slightly lower level of understanding of the EPC requirements. Just 62% of portfolio landlords state they have a full grasp of the regulations, compared to 69% of unencumbered landlords and consumer borrowers. This gap suggests that landlords with larger property portfolios may face more challenges in keeping up to date with evolving regulations and ensuring all their properties comply with the new standards.
This discrepancy in awareness could have far-reaching consequences for the rental market. As more landlords are required to make costly upgrades to meet the new EPC ‘C’ rating, many could face significant financial pressure. In some cases, landlords may be forced to increase rent prices to offset the cost of necessary improvements, which could impact tenants, particularly in areas where the supply of rental properties is already limited.
As the deadline for compliance approaches, the question remains whether enough is being done to help landlords meet the new EPC standards in time. While the regulations are aimed at improving the energy efficiency of homes and reducing carbon emissions, landlords who are unaware of the details or lack the funds to make improvements could face penalties. This could potentially drive up costs for tenants and lead to an even more challenging rental market, especially in regions where affordable housing is already scarce.
With the growing pressure on landlords to comply with these new energy efficiency standards, the need for clear guidance, accessible financial support, and more time to make necessary upgrades has never been more urgent. It will be important for the government and industry bodies to work together to ensure that landlords are fully equipped to meet these standards without sacrificing the affordability of rental properties or driving up rent prices for tenants.
A recent survey has revealed a range of strategies among landlords regarding the necessary improvements to meet new Energy Performance Certificate (EPC) ‘C’ standards. According to the findings, 42% of landlords plan to make the required upgrades to bring their properties up to standard. This group is committed to ensuring their rental properties meet the energy efficiency requirements, either through refurbishment or other enhancements, allowing them to continue letting the property.
In contrast, 24% of landlords intend to carry out only the minimum work needed to comply with the new regulations, while still continuing to let their properties. These landlords are taking a more cost-effective approach, ensuring that their properties meet the basic requirements without committing to additional improvements. Another 14% are focused on carrying out works that will enhance the long-term value of their properties, with the intention of maintaining the property as a rental investment for the future.
Interestingly, 3% of landlords plan to carry out the necessary works and then sell the property. This strategy indicates that some landlords may choose to exit the rental market altogether if the cost of improvements is too high or if they no longer see the property as a viable long-term investment.
However, the most notable finding from the survey is that 34% of landlords are considering selling their properties without carrying out any upgrades or are opting not to re-let them at all. This decision suggests that a significant proportion of landlords may be unwilling to make the necessary changes due to the cost, complexity, or perceived lack of return on investment. Additionally, 17% of respondents selected ‘other’ as their approach, and 3% said they would continue letting their property without making any improvements.
These varying responses highlight the diverse ways landlords are approaching the EPC ‘C’ requirements. While some are taking proactive steps to meet the standards, others are considering the sale of their properties, which could further tighten the supply of rental homes in certain areas. This trend raises concerns about potential rent increases, as landlords may seek to offset the costs of making improvements or may be less willing to offer affordable properties in the long term. As the deadline for compliance approaches, these findings underscore the need for clear guidance and support to help landlords navigate the changes effectively.
In terms of financing the necessary work to meet the new EPC (Energy Performance Certificate) standards, landlords are weighing a variety of options to cover the costs involved. According to the survey, 17% of landlords who intend to carry out the improvements plan to fund the work through their own savings, allowing them to avoid additional financial commitments. Meanwhile, a more significant portion, 41%, expect to raise the funds needed by increasing rents for their tenants, thereby distributing the cost across their rental income. This strategy, however, could lead to concerns about affordability for tenants, particularly in an already strained rental market.
Additionally, 28% of landlords are considering applying for grants that may be available to help cover the cost of energy efficiency improvements. These grants could help ease the financial burden, especially for smaller landlords who might otherwise struggle to meet the required standards. Furthermore, 12% of landlords plan to release equity from their existing property portfolios, a strategy that could allow them to fund the upgrades without impacting their daily finances. A smaller proportion, 5%, are looking into securing a further advance from their mortgage lender, while another 5% are considering taking out a loan to cover the costs.
The lender’s research was based on 720 online interviews conducted in September and October, providing a comprehensive overview of how landlords are planning to navigate these changes. A spokesperson for the lender commented on the findings, saying, “With potential new legislation aiming to raise energy efficiency standards and tackle fuel poverty for millions, landlords face significant decisions around future-proofing their investments in line with EPC requirements.” This comment underscores the fact that EPC ratings are becoming an increasingly important factor for landlords, as they not only affect the energy efficiency of their properties but also their ability to rent or sell them in the future.
The spokesperson also highlighted the growing awareness among landlords regarding the implications of these changes, saying, “Thankfully, this research helps demonstrate growing awareness among landlords around this topic and highlights both the financial and planning considerations involved in meeting these requirements.” As the government continues to push for higher energy efficiency standards, landlords must be proactive in understanding the full scope of the new regulations and how to comply with them. This may involve significant investment in property upgrades, but also presents an opportunity for landlords to enhance the long-term sustainability of their portfolios.
The spokesperson further noted the significant potential for lenders and intermediaries to assist landlords in meeting the challenges posed by the new EPC requirements. “It also underlines the tremendous potential for lenders and intermediaries to support sustainable practices in the buy-to-let sector, particularly through tailored green mortgage products that align with both regulatory demands and landlords’ unique needs,” they explained. Such products could offer landlords the financial flexibility they need to make the necessary energy-efficiency improvements while also meeting the regulatory standards that are increasingly becoming the norm in the housing sector. The introduction of green mortgage products could be a game-changer for landlords looking to future-proof their investments and create more energy-efficient properties that benefit both themselves and their tenants.
Ultimately, the shift towards higher energy-efficiency standards presents both challenges and opportunities for landlords. While the costs of compliance may seem daunting, those who act early and take advantage of available financial tools, such as green mortgages and grants, may find that these improvements not only help meet legal requirements but also enhance the value of their properties in the long term.
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