The government has previously set out an aspiration of a minimum C rating in England and Wales by April 2025. With the standards expected to get tougher, this could see Landlords unable to begin new tenancies in properties with an EPC rating below of D or below beyond April 2025.

The scale of the challenge is still huge. Recent research by Shawbrook Bank Limited  shows that only a quarter of landlords’ portfolios contain properties that all meet the EPC C target. Nearly four-in-ten (38%) have properties that are all rated D or below, a proportion rising to 58% of investors in London. Some 71% of all landlords still own at least one property in this category. If the proposals go ahead, landlords will not be able to begin new tenancies in these properties beyond April 2025. While eight-in-ten (78%) landlords say they have now heard about the 2025 EPC proposals, a significant knowledge gap remains. Of that group, more than a third (37%) admit to knowing only ‘a bit’ about the plans, and more than one-in-ten (11%) say they don’t know anything at all about the requirements.

Where does the responsibility lie?

The sharp rise in energy costs, combined with inflationary pressure across the economy, means the vast majority (85%) of tenants are taking steps to manage the rising cost-of-living. This level of financial pressure brings home energy efficiency into sharp focus. The research shows that in the last 12 months, more than a fifth (21%) of tenants have spoken to their landlords about making EPC improvements. The majority of renters (58%) say they would be less likely to look at a rental property with a rating of D or below and nearly threequarters (72%) of tenants aged 18 to 34 check a property’s rating before signing a contract.

75% of landlords have taken steps to support tenants during the cost-of-living crisis • 22% have made improvements to their properties in the last six months specifically to improve energy efficiency • A quarter (25%) have frozen rents • More than a fifth (22%) have reduced rents for tenants who are struggling • One-in-seven (14%) haven’t made changes but would be prepared to do so

The NRLA highlight a key issue is that landlords are expected to pay byut the benefit goes to the tenant who pay the bill. This is a challenge as Chris Norris Policy Director at the NRLA states

“Residential property is a significant contributor to the UK’s greenhouse gas emissions. It stands to reason, therefore, that in order to hit the government’s net zero target, the efficiency of our housing stock will need to improve. The challenge for the private rented sector is two-fold. On the one hand, there is the matter of the split incentive, where landlords are necessarily required to pay for the works but see little or none of the benefit. On the other, there is the net cost of the works required, which is substantial to say the least.

However, it remains highly likely that these changes are coming at some stage. If the 2025 deadline stands, landlords have a huge amount of work to do to bring their properties up to standard. And as is clear from our research with private tenants, there is also growing demand for properties with higher EPC ratings. Industry stakeholders need to do everything possible to support landlords and it is clear that improvement costs are a leading concern for investors, and particularly those with smaller portfolios. For lenders and brokers, providing this support means mortgage and bridging products tailored to their needs and ensuring the availability of most up-to-date and accurate guidance.

Rob Stross, Property Investor

Research Shawbrook Bank Limited