29% of landlords believe that the new EPC targets are only realistic with government support
Following the announcement that landlords will be required to improve the EPC ratings of their rental properties to a C rating or above by 2030, close to a third of landlords have called for government support to help reach these targets, according to new research from Shawbrook.
Shawbrook’s research found that 29% of landlords said that the targets set by the new Labour government would only be achievable with government support. With the costs of any improvements the key concern, a further 16% said they would struggle to afford the costs, and 25% said they plan to sell the properties that would require upgrades.
However, some landlords have already started to make investments in their properties prior to the new regulations being introduced. 21% of landlords said they have made some changes to their properties to increase their EPC rating to C ahead of the previous government scrapping the targets last year. 22% said they have undertaken upgrades and their properties are now rated C or above.
Professional portfolio landlords were more likely to have already made upgrades to their properties. A quarter of landlords with four or more properties within their portfolio had made changes prior to the targets being scrapped; in comparison, 17% of landlords with 1-3 properties said the same.
Previous research by Shawbrook conducted in 2022 as part of its Confronting the EPC Challenge: The Path to a Sustainable Rental Market white paper highlighted that the majority of landlords had been on the path to improve their properties prior to the government changing tack. 54% of landlords had made at least some efficiency improvements in the first half of 2022, prompted by growing demand from their tenants amid rising energy costs.
However, with the 2030 target never confirmed, and eventually scrapped by the previous government, some landlords held off or paused investment plans for their properties, and therefore still have steps to take to reach a C rating.
As the UK faces another winter of rising energy costs, tenant demand for energy-efficient properties is likely to rise again. However, with costs of materials and labour having increased in the last two years, making such improvements will come at a higher cost to landlords without any additional help.
Overall, new EPC regulations have sparked significant worry amongst landlords, with over three-quarters (78%) saying they are a concern and a quarter of those feeling very concerned.
Emma Cox, MD of Real Estate at Shawbrook comments: “Our experience has shown that landlords overall are motivated to improve their properties. In 2022 we saw many take steps to do so both in response to demand from their tenants, and the-then targets from the government.
"However, when these targets came into question, at a time of significant economic headwinds, many chose to hold off on costly renovation projects. With these targets back in place, landlords now must play catch-up.
“It’s encouraging to have greater clarity from the government which will allow landlords to put in plans in the run-up to 2030, but with just over five years left to comply it’s clear that landlords will need support to get there, both from the government and the industry. When you consider the housing stock in the UK, much of which was built prior to 1950, the extent of the challenge is clear.
"According to the English Housing Survey, 12% of the private rented sector is currently rated E to G. It’s also worth acknowledging that the cost of improvements is consistent nationwide, but the impact is disproportionately higher for landlords with lower-value properties, making a £10k investment far more burdensome in the North than in London, for example.
“Having a quality, energy-efficient, professional private rented sector is critical, particularly at a time when home ownership and access to affordable housing remains challenging. But this must be achieved with the support from government and industry.”