New EPC Regulations Proposed for Buy to Let by 2025
Updated: Apr 6, 2023
Late last year, the Government proposed new changes to the EPC regulations that would change the Minimum Energy Efficient Standards, coming into play between 2025 - 2028.
What is an EPC Rating?
First introduced in 2007, an EPC (Energy Performance Certificate) rating is used in England and Wales to judge a property's energy efficiency on a scale of A-G, with A being the most efficient and G the least.
A low EPC rating can result in lower energy bills as well as reducing your carbon footprint, which makes the property more attractive to potential tenants and buyers.
Landlords are responsible for providing tenants with an EPC rating and have to get a new rating every 10 years.
What are the new changes?
At the moment, you need an EPC rating of at least an E to be able to rent out your property. The big change is that beginning in 2025, any newly rented properties will need a rating of at least a C, and any existing tenancies will have until 2028 to do the same. The changes are being put in place to ensure energy-efficient homes meet the government net-zero carbon targets.
To go alongside the change of rating, a harsher penalty up to £30,000 per property will be dished out to a landlord for non-compliance. This penalty is currently just £5,000.
How to prepare
These changes could potentially cost landlords thousands of pounds, but the government have helped out with a list of things that will help to increase EPC rating. They recommend starting with low-cost measures such as adding insulation to wall cavities, floors, and lofts. They also suggest installing a smart meter and LED lights throughout the property.
To get a rating of C, landlords may have to splash the cash by getting more expensive products such as triple-glazed windows, solar panels, and more energy-efficient boilers.
Will landlords get financial support?
At present, there is no plan for landlords to receive any financial support to help deal with the new changes, but landlord associations and regulatory bodies are coming together to call for support financially.
Barry’s Comments
I can see why the Government is trying to raise the quality standards of Buy to Let to ensure that tenants get good quality properties, but I fear that in doing this it may squeeze landlords even more meaning that some Landlords are going to want to cash out. This will mean less available rental property and more competition which will inevitably mean increasing rental prices.
At present in Southend-on-Sea, 72 per cent of homes are rated D or below so the changes will be massive. Also over 19 per cent of homes in Southend-on-Sea are thought to be unable to reach an EPC of C or above, regardless of changes made, this is due to the construction and type of property in the area. I would imagine that a good proportion of that 19% at present is being rented out.
The average D rated property would need on average £12,746 spent to reach a C band, according to analysis by Savills.
The cost of upgrading a home from an E to C rating is over £17,000, while the cost of transitioning from G rating to C is estimated to be nearly £27,000.
Using the EPC fuel cost prediction tool, a D rated household (4 occupants in a 3 bedroom house) would have an annual fuel bill of £1411 -£1910 per year. Change that to a band C and there would be a yearly saving of £188 – £255 or a saving of £15 - £21 a month on fuel bills. The thing that renters will be most concerned about will be whether the potential increase in rent will be more or less than the savings.
My estimation is that with the huge investment to lower EPC bands and the grief involved, lessening supply and growing population demand the renter would be financially worse off every month with rental price increases rising faster than savings on energy bills.
I believe that renters may not be completely on board with the Government’s ‘net-zero-carbon’ challenge by 2050 when it costs them more every month!
Also bear in mind at present there is no minimum EPC rating for your own residential home but there is on your BTL/Investment Property! We may also see this changing over time with the government encouraging lenders to only lend money on a minimum EPC rating like they have with Buy to Let property.
The final decision is up for discussion over the up coming months but should the government plan get the go-ahead it could mean that both Landlords and Tenants could be far worse off!
Approved by The Openwork Partnership on 02/02/2023
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Some Buy to Let mortgages are not regulated by the Financial Conduct Authority
This 2021 article was updated on an April 6, but what year? Are the figures in the article all up to date? (Aug 23: according to UK govt approved site, average household bills rose by 54% in April 22 and another 27% in October). Surely these recent unprecedented increases in energy costs must have a renewed, greater bearing over other financial rental factors?
Tenants may begin to feel more in favour of EPC improvements that pay for themselves quicker, and if a commensurate rent increase is cost effective over soaring utility bills.
Conversely, landlords may feel their position even more undermined. (Well, especially those with a prime monetarising agenda).
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