Rental properties must reach EPC C by 2030. But making significant investments now could actually set your clients back...
The Government is proposing tighter energy efficiency regulations in the UK, requiring all privately rented properties to achieve a minimum Energy Performance Certificate (EPC) rating of C by 2030. Although these changes aim to improve housing quality and reduce carbon emissions, they’ve also raised significant concerns in the private rented sector (PRS).
According to Government figures, 52% of PRS properties are currently rated below C. Plus, there’s a growing concern among landlords that they’ll have to spend thousands of pounds to meet the new regulations.
But they shouldn't rush to make major upgrades just yet...
In this blog, we’ll tell you everything you need to know about the new EPC regulations and their implications for the rental market. We'll also tell you how you should advise your landlords to navigate the new legislation so they can ensure compliance and save money.
What is an Energy Performance Certificate?
An Energy Performance Certificate (EPC) is a document that evaluates the energy efficiency of a property. The certificate breaks down different aspects of the property, such as insulation, heating, windows, and lighting, and then rates the property from A to G, with A being the most energy-efficient.
The EPC bands are:
EPC A = 92–100 SAP points EPC B = 81–91 SAP points EPC C = 69–80 SAP points
*SAP = Standard Assessment Procedure
The EPC certificate also suggests areas of improvement in the property, outlining their cost and telling you how much you could save on your yearly energy bills once the changes are made.
- EPC D = 55–68 SAP points
- EPC E = 39–54 SAP points
- EPC F = 21–38 SAP points
- EPC G = 1–20 SAP points
*SAP = Standard Assessment Procedure
The EPC certificate also suggests areas of improvement in the property, outlining their cost and telling you how much you could save on your yearly energy bills once the changes are made.
What changes to EPC compliance is the Government proposing?
Currently, the minimum required EPC rating is E for all private rental properties, but the Government plans to raise this standard to a minimum EPC rating of C by 2030. This move aims to lift more than a million renters out of fuel poverty, making sure that homes are more affordable to heat and maintain.
The initiative also aligns with the UK's broader commitment to achieving net zero carbon emissions by 2050. The Government hopes to reduce overall energy consumption and lower carbon emissions by making homes more energy-efficient.
Improving standards in the PRS is a welcome step as tenants deserve warmer and more energy efficient homes. However, there remains uncertainty around the exact timeline for the implementation of the new EPC regulations.
The impact of new EPC regulations on the PRS
The impact of the new EPC regulations is far-reaching, with concerns echoed across the industry. According to Goodlord’s State of the Lettings Industry report, 61.1% of landlords and 57.7% of letting agents agree that higher EPC standards will negatively affect the rental market.
The report also reveals that nearly one-fifth of landlords are unwilling to upgrade their properties.
Implications for landlords
The financial burden of meeting the new EPC standards is substantial, with private rented dwellings needing an average of £6,864-worth of investment to comply, according to Government data.
However, there’s a clear gap between what’s needed and what landlords are willing to invest. Goodlord’s report reveals that most landlords are only willing to spend an average of £2,400 to meet the EPC band C requirement, far below what's required.
This mismatch raises serious questions. If landlords are unwilling or unable to invest in the necessary upgrades, those with more modest portfolios may leave the market. At a recent Goodlord event, Suzanne Smith, Founder of The Independent Landlord, said:
"Many smaller landlords want to do the right thing, but the pace of change is overwhelming. Without proper communication and realistic timelines, they’ll either struggle to comply or decide it’s just not worth it anymore."
The fact that landlords who don't meet the new EPC C requirement by 2030 could have to pay fines up to £30,000 or be banned from renting out their properties further emphasises the point.
Implications for agents
Letting agents are rightly concerned about stricter EPC regulations. If the increased compliance burden pushes landlords and properties that can't make the "C" grade out of the market, it’ll hurt your bottom line. You'll also face increased competition.
Another important consideration for letting agents is the increased risk of scams. Bad actors looking to exploit these regulatory changes could offer quick fixes to your landlords that have a negative impact on their chances of compliance.
Because of this, it's important that you can recommend well-researched, effective upgrades that actually move the needle, and provide any other support your clients need.
Implications for tenants
The new EPC regulations will improve property quality, but they may also lead to increased rents as landlords recover upgrade costs. While tenants prefer energy-efficient homes and may be willing to pay a premium for these benefits, the question remains:
Just how much more are they willing to pay?
For instance, upgrading a property to save £300 annually in energy bills might require upfront investments of £8,000. To recover the expenses, landlords could raise rents by around £70 per month. With Goodlord's data suggesting that more than half of tenants spend an average of 40% of their income on rent, this would further exacerbate the issue.
[How to strategically help your landlords achieve higher EPC ratings]
via [Goodlord]