Latest Landlords panel report on EPCs and their green agenda

Historically speaking, the EPC rating of a property made very little difference to its saleability or indeed the way landlords viewed it as a purchase proposition. However, a combination of factors including the Government’s intended measures in this area plus a wider focus on energy efficiency, all things green, and the cost of utility bills has drawn this into a much sharper spotlight.

According to the latest Q4 2022 BVA BDRC Landlord Panel research report, over two-thirds of landlords (68%) said they would now be less likely to purchase a property if it has an EPC rating of below C – the level at which anticipated legislation is likely to be introduced for all new and existing private rental sector tenancies from 2025 onwards.

Of those specifically looking to buy in the next 12 months, almost two-thirds (59%) said they would be looking to buy a property rated C or above, while 29% said they would be buying those rated D through to E. Landlords were also more likely to sell a property rated D-E over the next 12 months, rather than one rated A-C.

The research also asked landlords how many properties held within their portfolios were rated below C, with the results showing almost four in 10 rental properties did not currently reach this level. This means that the average landlord currently has 2.9 properties rated D and below, with the figure rising to 9.8 for landlords with larger portfolios – over 11 properties.

In terms of raising EPC ratings, two-thirds of landlords said they would carry out any works required to increase the EPC level of a property and carry on letting it out. In sharp contrast, 20% said they would not carry out any works and seek to sell or not re-let.  

When asked what methods of funding they would use to carry out any work, 62% said they would use savings, 30% said they would put up the rent to cover the cost, 19% would seek a Government grant or funding, 10% would take out a loan, 8% would release equity, 6% would seek a further advance, while 11% said they could not currently afford to carry the work out.

The anticipated costs per property were suggested to average £8.3k, although those with larger portfolios believe the cost would be closer to £9k per property.

Looking forward, 2023 could well be the year when we see EPC’s as a truly defining force within the buy-to-let/private rental sector, and advisers who understand how these can pivot into lending propositions and landlord needs will be best placed to support their clients in an area which is now a much greater consideration than ever before.

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