Green credentials… and EPCs fifteen years on

These were first introduced in 2007 as a result of EU Directives around the energy performance of buildings and played a key role in the integration of the Home Information Pack (HIP), a pack which was initially provided by those selling properties with four bedrooms or more. The requirement to have an EPC gradually extended to all buildings, both commercial and domestic. In May 2010, the government changed the legal requirement of a HIP but EPCs remained a compulsory element in the renting or sale of a property.

EPCs play a critical role in identifying good and bad green credentials within individual properties and allows buyers to make an informed decision about what to do with this data.

It was highly encouraging to see that over 9 in 10 landlords are aware of the new EPC ‘C’ legislation, according to the Q2 2022 BVA BDRC Landlord Panel research.

From a purchase perspective, EPC ratings are having an impact for landlords looking to increase their portfolios. The BDRC research found that out of all the landlords intending to buy this year, 63% are specifically aiming to purchase A-C rated properties, while 24% were looking to purchase D-E rated properties. Only 2% were reported to be specifically looking to purchase a property with an EPC rating of F or G.

In the residential market, buyers are reported to be more likely to negotiate asking price discounts to factor in the cost of making green improvements to the property in the next ten years.

According to a recent report from Rightmove, which outlined that 41% of homeowners have made changes to improve their home, but for the remaining 59% the biggest reasons for not doing so was because they didn’t feel they needed to make improvements, or that the improvements are too expensive. The biggest motivator was to reduce their energy bills. Sellers who have already made changes to improve the EPC rating of their home are pocketing as much as 16% extra on average when selling their home.

These figures help demonstrate just how prominent energy efficiency sits in the thoughts of homeowners, landlords and tenants. This is in sharp contrast to the past and represents a trend which will become more apparent as energy prices escalate further and when it comes to shifting attitudes towards the UK’s drive to hit Net Zero.

The mortgage market will continue to play a central role in this progression and lenders who are active and innovative in this space will lead the way in driving positive change in the mindset of intermediaries and borrowers, which will benefit all generations.

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