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Delivering EPC requirements and driving sustainable practices
In a bid to improve energy efficiency and reduce fuel poverty for millions of people, the government recently announced that it will shortly consult on proposals for private and social rented homes to achieve Energy Performance Certificate C or equivalent by 2030.
Currently, private rented homes can be rented out if they meet Energy Performance Certificate E, while social rented homes have no minimum energy efficiency standard at all.
According to the Pegasus Insight Landlord Trends research report for Q3 2024, two-thirds of landlords currently own at least one property that does not currently meet this standard. This figure rises to 76% among landlords with 11 or more properties, though a smaller portion of their overall portfolio is impacted, averaging 29%.
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On a positive note, awareness of these EPC standards is high, with 92% of landlords having at least some knowledge of the requirements. However, only two-thirds (67%) report a thorough understanding of the details. Notably, portfolio landlords with four or more buy-to-let mortgages demonstrate slightly lower comprehension of the potential regulations, with 62% stating they fully understand the requirements compared to 69% of unencumbered and consumer borrowers.
When it comes to meeting these EPC standards, 42% of landlords intend to make the necessary improvements to bring their impacted properties up to standard. Of these, 24% plan to carry out works at the minimum cost required to comply, and continue to let the property out, 14% aim to carry out the works that maximise the long-term value of my property, and continue to let it out, while 4% will carry out works to bring it up to standard then sell it.
In contrast, 34% plan to sell without undertaking any work or not re-let the property, 17% responded ‘other’ with 3% intending not to carry out any works and continue letting the property out.
For those who plan to carry out the necessary work, most expect to fund the improvements through savings (71%), rent increases (42%), government grants/funding (28%), with a further 12% saying they would release equity from their portfolio and 5% seeking a further advance from a mortgage lender or a loan (5%) (Page 57).
The expected financial commitment is significant, with landlords estimating an average cost of £12,000 per property to achieve an EPC ‘C’ rating. Planned upgrades include solid wall or floor insulation (37%), loft insulation (26%), boiler or heating system upgrades (25%) and solar PV panels (22%). Notably, 13% of landlords remain uncertain about the specific improvements needed, while 37% are unsure of the total potential cost per property.
This evolving landscape gives lenders and intermediaries the opportunity to drive sustainable practices within the buy-to-let sector while strengthening client relationships and expanding their services. As the market increasingly shifts towards a more sustainable approach, green mortgage options offer a strategic way for landlords to align with regulatory demands and future-proof their investments.
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