Dealing With a Deadline – How Landlords Can Overcome EPC Challenges

Are you letting property? Then you need to make sure that it has an EPC rating of C or above by 2025. Otherwise, you’ll be unable to take on new tenants going forward.

This is due to the government’s new initiative to fight climate change. Increasing the energy efficiency of Britain’s housing stock is an integral element of the strategy.

However, meeting this target can be costly for landlords – with a price tag of up to £10,000 per property.

Shawbrook Bank recently released a new whitepaper, Confronting the EPC Challenge, assessing how the negative impact on the rental market can be minimised.

The status quo

The current state of the energy efficiency of British rental properties is dire.

A quarter of landlords say that their property has a below-D rating. Another 25% don’t even know their properties’ grades, though they have to provide EPCs for new tenants. Plus, 15% weren’t aware that regulations were changing or that there’s a deadline.

Pre-war buildings are particularly affected by the challenge to increase energy efficiency. Over 30% of private rental properties in Britain predate 1940, with corresponding low energy efficiency.

On average, landlords who need to make changes estimate that it will cost them £5,900 to achieve a C rating. Unfortunately, this figure is likely to rise as demand increases. In addition, many tenants will need to leave the properties they rent in order for improvements to be made.

Paul Elliott, Managing Director at Propp.io, a property finance comparison site, says, “Landlords need to build this into their investment strategy right now. Factoring in an additional 10% cost on top of the purchase price for works to improve the EPC can change a deal from a good one to a bad one. And ignoring the problem completely could lumber investors with useless stock – unrentable and potentially even unsellable.”

Market impact

The impact of the EPC challenge on the market is significant, in particular since it’s impossible for many period buildings to achieve the required ratings.

As a result, they will no longer be available and the market, with rents already at a high point, will become even more competitive.

Furthermore, EPC ratings are already a key factor in investment decisions for a quarter of landlords. 15% even say that they’re no longer interested in property more than 20 years old.

One considerable source of worry is how to deal with costs. Over 50% of landlords are thinking of passing some of it on to their tenants. After all, they will eventually benefit from lower energy bills.

Actionable advice for landlords

So what can landlords do right now?

First, it’s crucial to check the EPC register, both to figure out what your property’s current rating is and what improvements you need to make.

The second essential step to take is to secure funding as soon as possible, and to get started on work. With the deadline looming, demand is going to spike the closer it gets – driving prices to painful levels.

The best – and most budget-friendly – way of dealing with this challenge is to face it head-one and get a head start.