In an unexpected U-turn from the Government, Rishi Sunak has scrapped the proposed changes to minimum EPC requirements for buy to let properties. Below, we examine the latest industry reactions and discuss what this means for the sector.
Last week, the government made a drastic U-turn on its green policies, including scrapping the proposed changes to EPC regulations. The changes required landlords to ensure their properties had an EPC rating of C or above for all tenancies by 2028.
Whilst abandoning the plans altogether has come as a surprise to the sector, Michael Gove had hinted that landlords could expect changes to the proposed legislation in July when he commented that the government were “asking too much too quickly”.
Landlord Progress in Making EPC Changes
Despite Gove’s concerns, new research from lender Shawbrook Bank reveals that 80% of UK landlords had already prepared for EPC regulation changes before they were scrapped.
30% of those surveyed said their properties already have an EPC rating of A-C, while 50% had plans to improve their ratings before 2025.
Just 17% of landlords said they were unprepared for the changes and had no plans to improve their EPC ratings, and as little as 3% had not heard of the regulation.
Shawbrook’s research also highlights the costs involved with the proposed changes. Almost half (46%) of landlords have spent between £500-20,000 on improving or investing in their property, but the average total spent is £25,148. This amount rises to £37,164 for London-based landlords.
What this means for landlords
This news will be a relief for many of you due to the substantial financial implications of getting your properties up to a minimum EPC C. With little to no financial assistance on offer, these changes were a significant burden for many landlords already trying to navigate the challenging economic landscape of the buy to let market.
Whilst Sunak has scrapped the changes, it’s still worth considering making energy-efficiency improvements to your properties.
According to the latest JLL 2023 Tenant Survey Report, 90% of tenants said energy-efficient properties are an important or crucial factor when considering their next home, with 69% hoping to save on energy bills. Furthermore, when asked for the top priorities for rental properties, energy efficiency/running costs ranked second at 91%, following closely behind broadband speed at 93%.
Hopefully, this tenant sentiment will reassure those of you who’ve already made green improvements that it wasn’t a waste of your time and money.
Emma Cox, the Managing Director of Real Estate at Shawbrook Bank, commented, “Scrapping the impending EPC regulations might free up capital in the short-term for landlords who haven’t yet invested in improving the energy rating of their properties.
But while policies shift, climate change is going nowhere, and energy-efficient buildings will remain central to net zero plans. Rules might not be changing as soon as 2025, but professional landlords with modern, energy-efficient stock will be in the best position to attract tenants, as well as reduce potential voids, and importantly, be prepared for future legislative change”.
What’s next for energy efficiency in the BTL sector?
It will be interesting to see how lenders react to the news and what this means for green product ranges. Several more specialist buy to let lenders had begun to offer ‘Green’ mortgage products, which are discounted for landlords whose properties have an EPC rating of A-C. With the government’s change of plans for minimum EPC requirements, it’s now uncertain whether more lenders will enter this specialist market or whether these products will become competitive enough to make them ‘worth it’ for landlords.
There will undoubtedly still be pressure on the housing sector to reduce carbon emissions to help achieve the government's net zero target. Still, it's unclear what will be expected of landlords for the time being.
If you have any questions on how today’s Statement will impact your property investments or to discuss your property finance plans, contact our brokers on 0345 345 6788 or submit an enquiry here.
