Another bombshell will be hitting the rental market in a few years’ time in the form of changes to the Minimum Energy Efficiency Standards for rental properties. What will the implications be for landlords?
MPs are set to debate the Minimum Energy Efficiency of Buildings Bill in the autumn. The bill proposes increases to the Minimum Energy Efficiency Standards (MEES) for rental properties from a minimum EPC rating of E to C from 2025. It is estimated that there are 2.9M homes in the UK that would need to improve their energy efficiency to meet the new threshold (approximately 65% of properties) which could cost the sector £29 Billion.
Obvious questions surround this around who would pay for these improvements and what would the impact be on the supply of rental properties? If property owners are forced to pay, then many could take the decision that it is no longer economically viable to let out the property. This would undoubtedly push up rents as landlords would be forced to find ways to recoup costs and rental stock dwindled.
The issue could be exacerbated by a significant shortage of financial support for the sector (in the form of grants) to meet these targets. Cash support has been reduced from the £1.5B Green Homes Grant to just under £600M in the form of a nationwide home upgrade fund which only targets low income families.
Under previous MEES legislation, the government introduced a minimum EPC threshold for rental properties of E. Exemptions were available once £3500 had been spent in an attempt to meet the threshold. Properties with these exemptions are still being let out (approximately 120,000 of them). The anticipated costs involved in meeting the EPC C target would be significantly higher – estimated at around £10,000 per property. Unless exemptions proportional to the cost are available then there is likely to be a market impact. However, the flip side to this is that any exemptions provided will detract from the government’s target for reduction in carbon emissions and leave rental properties sitting outside the legislation and continuing to be let.
We will closely monitor the situation as it develops and keep you informed of the detail as it emerges.
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