Property Investors Guide to the New EPC Criteria

As the UK moves towards a greener future, landlords are facing the possibility of having to meet new compulsory energy performance requirements. This change would see new tenancies from December 31^st, 2025, being legally required to meet a C-band rating. This change will affect existing tenancies from December 31^st, 2028, which will also need to adhere to a C-band rating.

Energy performance certificates (EPCs) indicate the energy efficiency of a building. To calculate this score various factors are taken into consideration such as building materials used, heating systems and insulation. The information is collected by accredited energy assessors and the score is generated by government-approved software. A score is then processed, and a certificate is awarded scaling from A to G. An EPC rating of A is the most energy efficient.

Only 38% of existing rental properties meet the new requirements. This is leading to one in five landlords considering selling their buy-to-let properties according to Which?. However, landlords and tenants could both benefit from the changes, should they come into effect.

What Property Type is the Most Efficient?

According to the Office for National Statistics report, apartments were the most energy-efficient properties in 2021 with a median efficiency score of 72, which is equivalent to a band C. On the other hand, detached and semi-detached houses scored a median of 63, the equivalent of a band D. This is often due to the size and density of the living space. The average apartment measures around 452sqft whereas, the average house measures 818sqft, making apartments much easier to heat.

Median UK energy cost per year (2021):

Existing property: £797

Newly built property: £390

Statistics from the Office for National Statistics.

What Should First-Time Investors Do?

New investors can buy existing properties and invest further to meet the new EPC criteria. However, with some landlords expected to pay as much as £27,000 to bring their property up to the new standard and up to 1.7 million properties not being available for upgrade, there is a huge risk involved.

It is suggested that first-time investors now favour newly built properties as these properties are often more energy efficient. It is highly unlikely that once an investor has purchased a newly built property it will need additional work to meet the new criteria.