Energy Performance Certificates (EPC) are a great idea – they give you a clear idea of how energy efficient a dwelling is and how it can be improved. They’re really handy for landlords, and tenants too.

According to a BBC report, “The UK has some of the least energy-efficient housing in Europe – largely because much of the housing stock is so old.”

This map from Tado (right) shows average heat loss over five hours across Europe:

You’d think therefore that clear government leadership on improving energy efficiency would be front and centre, given the high profile of combating climate change. You’d think – but would you be right?

Unfortunately, with expected EPC changes in England, confusion is rife at present, we’ll explain why shortly.

A couple of years ago, we suggested that landlords in Scotland should face up to the inevitable changesand start planning for an energy-efficient future, pointing out that a good EPC rating was a positive selling point when searching for tenants.

As a property professional with years of experience of EPCs and their effect on landlords, I’m going to examine what’s happening in England and where it leaves the PRS across the nation.

England’s PRS and the progress of EPCs

The current requirement in England to meet the Minimum Energy Efficiency Standard (MEES) is band E on an EPC. This has been the case for new lets since the first of April 2018, and for all lets from April 2020.

Since then, the government has been consulting on improving the MEES in England, however their proposals have been thrown into confusion as a result of a couple of private members bills put before parliament.

According to the Landlord Zone; “The DoE for Energy Security and Net Zero had… proposed a deadline of 2025 for newly-let rentals to achieve an energy performance rating of at least C, and a deadline of 2028 for all other rented properties”.

So far so good, until the Minimum Energy Performance of Buildings (No.2) Billwas laid before Parliament. This proposed that new tenancies should meet EPC band C by the end of 2025, and all tenancies should comply by the end of 2028.

‘But aren’t those both the same?’ I hear you cry while scratching your head. At present, no, they’re not. One is presently a proposal, while the second, if it completes the journey through Parliament, would become law.

It’s important to understand a bit about Private Member’s Bills (PMB). PMBs seldom complete their passage through parliament without government support. Often they fail for a simple lack of parliamentary time.

Even with government support, circumstances can collude to deny them their day in the limelight – what former Prime Minister Harold MacMillan referred to as “Events, dear boy, Events”.

At present therefore, neither of these suggestions have any legal force, but it would be wise not to ignore the general direction of travel. All of this has however caused a deal of consternation amongst landlords down south.

Also within the government’s proposals is an increase to the current spending cap from £3,500 to £10,000 per property to reach the proposed standard; a substantial increase and quite a burden on landlords.

This has caused some to contemplate selling current properties and investing in newer properties which would require less, or no, work to reach the proposed levels. Confusion and uncertainty benefits no one. 

Elsewhere in the United Kingdom

Matters concerning MEES are less confused elsewhere in the UK.

Scotland

Compared to the EPC changes in England, the Scottish government had been fairly clear about what they require from landlords with regards to energy efficiency and what they will require in the future.

However, the date the legislation was due to come into effect has changed and currently, there is no definite date. 

Originally the Scottish Government had decided that all private rental properties should meet band D by 2022, however the disruption caused by COVID put an end to this.

Instead, the aim is now to have new lets achieve band C from 2025, with all other tenancies to reach that level by 2028 and all property owners to comply by 2029. As in England there are likely to be exemptions, including for properties that cannot viably achieve that rating.

Northern Ireland

At present, Northern Ireland (NI) follows the UK government’s rules on EPC rating for rental properties. Practically that means that a MEES of band E is required for all rental properties.

Northern Ireland is in a peculiar position, with the devolved government suspended at present, and therefore no NI specific legislation is being promulgated. Should that situation change, we may see local legislation at variance with the UK government.

Advice from the property pros

It’s fair to say that the situation with regards to energy efficiency within parts of the UK PRS is fluid at present! The largest market, England, is in a state of some confusion, and uncertainty is never good for any business sector.

The government consultation, Sir Roger Gale’s private members bill, and a lack of specific direction at present have all given rise to understandable concerns for landlords.

Whether selling up now and trying to acquire more modern, higher rated properties is the best policy is questionable, but there is evidence that some landlords are considering just that.

Admittedly, the prospect of facing a potential bill of £10,000 per property is a fairly persuasive argument for many landlords, especially when you could spend that and still fail to meet the requirements, forcing you to apply for an exemption.

Landlords at that point could be forgiven for wondering what exactly was the point of the exercise!

We think, as we did a couple of years ago, that it is important to be cognisant of the direction of travel. The drive to improved efficiency and greater energy efficiency is not going to go away. It may stumble, but it will ultimately happen.

If we had to place a bet on what will ultimately happen in England, we’d put a small wager on the current government proposals becoming law, assuming sufficient time and will.

They broadly reflect the intentions in Scotland and are in keeping with the Net Zero targets set for 2050.

Scotland and Wales are more settled in this respect at present, insofar as rules and intentions appear to be clear and relatively unambiguous. Circumstances currently mean this is also true in Northern Ireland.

Landlords who offer comfortable, energy-efficient properties will benefit, especially when there is little sign of domestic energy costs reducing in the near future. Tenants gain nothing if a cheaper rent means crippling fuel costs just to stay warm.

It may be possible to offset some of the costs involved against tax, but at present it looks as though this would only apply when selling the property, which is of rather limited help on a day-to-day basis.

In summary…

Thanks for reading this far. EPC changes in England isn’t perhaps the sexiest subject when discussing the PRS, but it is increasingly intruding into the landlord’s area of responsibility.

The whole housing market, not just the PRS, is seeing a consistent drive towards more energy efficient housing. Consequently we all have to accept that overcoming climate change is going to affect all of us.

We’d reiterate our advice to landlords to try and get ahead of the curve if they can, while EPC changes in England are unsettling, it’s pretty clear that further changes to MEES are coming, and there is a clear indication as to what they may look like.

If you’d like to discuss energy efficiency, EPC changes in England, or any other aspect of buy-to-let investments, just get in touch. We have years of experience in the private rented sector within the UK and we are always happy to share.

Written by Chris Wood, MD & Founder of Portolio

Get in touch on 07812 164 842 or email [email protected]