Energy inefficient properties likely to be given the cold shoulder by landlords

energy efficiency 2

A quarter of landlords surveyed have indicated that they are likely to avoid any property with a low EPC rating when looking to add to their portfolio, according to new research from Shawbrook.

Data from Shawbrook has revealed that the proposed Energy Performance Certificate changes are already starting to sway the buying preferences of landlords, with nearly a third suggesting that they would buy a property that already has a C rating or above, and a further 24% saying that they were more likely to prioritise a property with the potential to reach C or above.

More surprisingly, 15% of landlords said they will only buy properties built in the last 20 years.

In 2020 the government proposed changes to the Minimum Energy Efficiency Standard, stating that landlords may need to reach an EPC rating of C or above by 2025 for all newly rented properties, and 2028 for all rental properties. One of the challenges faced with these proposals is that a significant portion of housing stock across the UK was built before 1940 and is therefore unlikely to be C-rated or above.

Landlord property choices are set to evolve as a consequence of the upcoming changes, which in turn poses a potential issue for the UK’s housing market. Demand for period properties could dwindle, leaving current owners at risk of being unable to sell without making improvements themselves.

On average, landlords estimate making the necessary improvements will cost them £5,900 on average.

Pressure is also on landlords from their tenants to consider energy efficiency. 28% of landlords have already had tenants complain at least once about a property’s EPC rating, and 16% have received multiple complaints.

Landlords are, however, more likely to make changes to properties if their tenants ask. 61% of landlords said they would be more likely to make updates to their property if tenants requested it.

Shawbrook recently launched their Energy Efficiency Discount to new Buy-to-Let customers where the property’s Energy Performance Certificate (EPC) rating is ‘A’, ‘B’ or ‘C’. Landlords can receive up to 60bps off the arrangement fee on new cases, or receive a partial refund if the EPC improves to at least a ‘C’ throughout the life of the mortgage with Shawbrook. This incentive is part of the bank’s commitment to supporting landlords on their journey to becoming more energy efficient ahead of the current EPC proposals.

Emma Cox, MD of real estate at Shawbrook, said: “It’s concerning to think that a significant proportion of properties, within the Private Rental Sector, could fall out of favour due to poor EPC ratings and significant improvements needing to be made in a short period of time. The market has a responsibility to offer landlords more guidance on what the proposed legislation will mean for them, where to start with improvements, and how to sustainably finance the works.

“Proactive landlords, already making changes ahead of the proposed deadline, will be in a strong position for the future, constantly one step ahead of the upcoming changes. While our research shows that most landlords are set to commence improvement works within the coming 14 months, making changes sooner rather than later will limit the risk of supply and labour shortages for landlords as we edge closer to the proposed 2025 deadline.

“Our research and recent roundtable have provided us with great insights into just how significant the proposed changes will be for the market and what more landlords need. This has led us to announce a new Energy Efficiency Discount for Buy-to-Let customers with a low EPC rating. This incentive, that actively rewards customers when a property already had a rating of ‘C’ or above, will go some way to helping landlords become more energy-efficient and help them to play an active role in contributing to a more sustainable future.”