Understanding proposed EPC changes for domestic properties – a guide for landlords

With the government seeking to raise energy efficiency standards in domestic homes from 2025, we look at how these proposed changes could impact private landlords renting out properties in England and Wales from 2025.

What EPC changes ARE the government proposing?

The government is proposing changes to the Minimum Energy Performance of Buildings (No.2) Bill, which governs the minimum energy efficiency standards that a privately rented building must meet in order to be tenanted.

Currently, the minimum EPC band landlords need to achieve to rent out a property in the private housing sector in England or Wales is an EPC E, however, the new proposals are seeking to raise this minimum threshold to an EPC C.

Should this Bill amendment be approved, it would mean that all privately rented homes in England and Wales need to achieve a minimum score of EPC C in an energy performance assessment to meet the legal standards for the property to be tenanted.

When are the proposed changes due to take effect?

Under the current proposals being debated in parliament, the government has outlined its intention for the legal change to EPC requirements to take effect in two stages:

  • By 2025, it wants EPC C to be the legally required minimum for all new tenancies in England and Wales.
  • By 2028, it plans to blanket extend this legal requirement for EPC C to all private tenancies.

What does this mean for landlords?

If the Bill is passed, landlords in England and Wales whose properties rank below an EPC C will essentially be left with two choices.

They will either have to, improve the energy efficiency of their property to bring it up to a level C standard that enables it to be legally let, or they can choose to sell the property.

This means that landlords will, either need to meet the financial costs of making their rental portfolio energy efficient (which could amount to £4,700 per property based on government modelling) or, they will have to forfeit or slim down their portfolio to offload properties that can no longer be legally rented.

Read our advice for improving energy efficiency in commercial buildings here.

Will property prices be affected?

While it’s too early to surmise the impact any proposed EPC changes could have on property prices, it’s reasonable to speculate that properties falling below the EPC C minimum may, in future, see their value fall, particularly if the market were to suddenly be saturated with properties with a sub-C EPC rating.

For landlords with the capital and resources to make energy efficiency improvements however, this could present a prime opportunity to purchase new rental properties for less than market value.

Are there any exemptions to the proposed EPC changes?

There are, but very few that will affect the majority of homes in England and Wales.

Currently, only listed residences, for which restrictions on development may inhibit the ability to make property improvements, may be exempt from the changes to EPC rules the government is proposing however there is ongoing conversation around how EPC applies to these buildings and in line with current PRS Regulations.

Why now?

The government has announced its intention to make the UK carbon neutral by 2050 and tackling the energy efficiency of properties is a key part of its agenda to meet this target.

Figures released by the Department for Business, Energy, and Industrial Strategy, estimate that UK homes account for 15% of greenhouse gas emissions, with poor insulation reportedly at the root of the problem.

Many of these underperforming properties are currently within the private rental sector, with a report on housing demand undertaken by the House of Lords, finding that 45% of landlords own one rental property, while 38% own between two and four.

What stage are these proposals at?

At the time of writing (March 2022) the government’s proposal is currently at the second reading stage in the House of Commons. This is due to take place on May 6, 2022.

If the second reading is successful, the amendments will undergo a committee stage, followed by a report stage, and finally the third reading. Should this all be met with majority approval, the bill would then advance to the House of Lords, before being put forward for Royal Ascent.

Will the government be offering landlords any financial support?

At present, no bursaries or grants have been announced, however, with a growing cost of living crisis spurred on by rising fuel, food, and energy prices, it is possible the government may unveil some form of financial compensation to assist landlords in the future. Landlords are reminded to take 

As plans stand, however, the onus is very much on landlords to foot the bill, with the government also proposing raising the cap for energy performance investments from £3,500 to £10,000.

It’s also worth noting that the penalty for not providing an up-to-date EPC when selling your home or letting it to a new tenant could, under the proposed plans, rise by 500% from £5,000 to £30,000.

Next steps

We will continue to provide updates as the Bill progresses and further advice for landlords as required. In the meantime, you can read the full consultation document here.

Meanwhile, read are our top tips for improving energy efficiency in a commercial building here.

For more information about Sillence Hurn's landlord solutions, from building surveying (which includes an EPC report) to project management of improvement and renovation works, click here: landlord solutions.

Disclaimer: Please note this article is for guidance purposes only and does not constitute legal advice.

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