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EPC Requirements for Landlords
Introduced in 2021, new EPC requirements for landlords were to reach a C rating or above by 2025 for new tenancies and by 2028 for existing tenancies. However, the government scrapped this proposal in October this year. Currently, the EPC rating for letting is a minimum of E and will remain so for the foreseeable future.
This comes as welcome news for most landlords and investors. However, despite this change, a survey from Hive proves that most people still see the importance of greener homes. 55% of those surveyed believe that making properties energy efficient is something everyone must think about, while 47% have already been making the necessary changes to make their properties more sustainable and greener.
Before this EPC rating for letting was scrapped, many landlords were making such improvements ahead of 2025. According to Shawbrook Bank, 4 out of 5 landlords have begun energy efficiency improvements on their existing property portfolios. 30% of these landlords have claimed to have already achieved EPC ratings of A-C. However, landlords already improving energy efficiency in their properties should not be disheartened by the U-turn.
While the government has scrapped this proposal, they remain committed to the Minimum Energy Efficiency Standards (MEES) and ask landlords and homeowners to ‘upgrade energy efficiency where possible’. Doing so aids the country in reaching net zero by 2050 while improving living conditions and energy bill savings for tenants. Not only that, but such properties will always be in high demand in the rental market and worth far more.
The Energy Bill
The Energy Bill has been a decade in the making and reached the Royal Assent in October this year. Now law, it ensures that households and businesses have access to more affordable energy and, in all, aims to make the UK more energy independent.
Measures in the Energy Act aim to accelerate planning for renewable energy, so it will be generated and available much quicker. This includes onshore and offshore wind projects, plus a potential private investment of £100 billion to scale up jobs and support the growth of the energy infrastructure itself. By 2050, when we will hopefully reach net zero, the country will reach its net zero goal and save households up to £1 billion off their energy bills. £420 million of this total is predicted to be over the next decade alone. All of this helps towards the country’s commitment to net zero.
Energy efficiency is key to reaching this goal. One of the many benefits of off-plan properties is their energy efficiency. According to a study this year, approximately 80% of new homes have an EPC rating of A or B and 5.7% of new flats are even carbon neutral. Not convinced about their benefits? Data from Knight Frank reveals that only 0.1% of properties, both houses and apartments, in 2009 reached net zero. As of 2022, this has grown to 4% of houses and 5.7% of apartments.
Rental demand is far higher for an energy-efficient home than the opposite. Because of this, many young professionals search for new homes due to being built to a higher specification. They are built with more up-to-date designs, like insulations, newer heating systems, and the latest appliances. What is more, due to better heat retention, energy bills are much lower.
EPC ratings are much higher in newer builds, and tenants can offer up to 20% more than the market price to secure them. If a landlord improves the energy efficiency of their buy-to-let property, it increases the quality of the tenants and makes the property stand out in such a competitive market.
Value, Rent and Costs
Many investors may think the cheaper the property and appliances, the less money they spend. This is not always the case. The more energy efficient a property is, with newer infrastructure and systems, the more money is saved in the long run. Smart upgrades like LED lights, insulation, and appliances also mean maintenance is far less likely and energy bills are up to 20% lower each month.
Also, the more energy-efficient a landlord’s BTL property, the higher its value. Whether buying off-plan or upgrading an existing property. Due to this, and high-quality tenants offering up to 20% more, higher rent can be set – which will increase due to the recent 5-year rent forecast
Better Quality of Life
While saving money and finding the perfect tenants to fill the property is important, keeping the tenants is even more so. Due to the demand for energy-efficient properties and the improved quality of life they provide, residents are more likely to extend their tenancies. This higher retention rate of tenants means landlords will experience far fewer void periods.
What is more, providing a better home makes happy tenants. Fewer things go wrong, like maintenance issues, and landlords can sit back and keep generating passive income. Making such energy improvements also increases renters’ rights, which works towards the Renters’ Reform Bill recently addressed in the King’s Speech.
Solar panels are first in Hive’s list of what is most desirable to tenants in an energy-efficient property. Solar panels and heat pumps greatly improve a property’s efficiency, value, and desirability.
In 2022, 42% of the UK’s electricity was fuelled by renewable energy. This is a drastic increase from just 7% in 2010 and will only continue to climb as the country continues its efforts towards net zero. New homes are already built with the up-to-date infrastructure for necessary works, some with either solar panels installed or with the groundwork for them and electric car chargers to eventually be added. This makes cheaper and easier work with no rewiring or major work necessary.
On Hive’s list of energy efficiency most desirable to tenants, insulation is second. Insulation does not just improve a property’s energy efficiency and heat retention, it also reduces noise levels, which creates a far nicer home for tenants – especially in apartments.
Improving the insulation of a property makes it overall much cheaper to heat. Even by simply installing an insulating jacket on hot water tanks and pipes, Energy Saving Trust reveals that a total of £70 a year can be saved on energy bills.
Upgrading windows to double or triple glazing, ensuring there are cavity or solid walls, as well as loft and roof insulation – and even small improvements in draught-proofing – can make a large difference in energy efficiency, and all the difference in making a house a home.
Upgrade Systems and Invest in Smart Tech
Smart meters, smart thermostats, Energy Star-rated appliances – all are small upgrades a landlord can do to make their property more energy efficient. Such systems allow tenants to monitor their energy usage and provide more accurate readings for energy bills.
Consider upgrading boilers to newer models, too. Old models can be more expensive to run and require more maintenance. Newer boilers are the opposite and make a property and its heating system far more energy efficient. Did you know that LED lights use 90% less energy, too? They may be slightly more expensive than traditional bulbs, but LEDs last far longer and cost much less than their unsustainable counterparts. Also, you can be a step ahead as incandescent and halogen light bulbs continue to be phased out.
Landlords and Energy Efficiency
Despite the government scrapping the C and above EPC requirements for landlords, energy efficiency is still important. It can be the easier, more tempting short-term solution to halt all plans and work for landlords to make these improvements. However, some landlords have had trouble selling properties with poorer energy efficiency standards. Investing in property is always a long-term plan, after all.
New homes are more energy efficient and up to date with regulations and can be more easily worked on than renovating existing, older properties. Buying off-plan makes the entire investment cheaper and often higher-yielding, too. This is thanks to the chance of purchasing 10-15% below the market value and the instant equity upon completion. However, if securing an older or below-market value property, using a bridging loan as short-term funding to renovate it can be useful.
Energy-efficient upgrades do not immediately mean large expenses. A landlord can start small in improving a rental property’s energy efficiency. Consider starting small with draught-proofing and better insulation.
It does not just help landlords in the long run, with costs and demand, but tenants and the planet will thank you, too. Green, after all, is good.
Get a head start on a greener, more energy-efficient portfolio with off-plan properties.
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