Currently, all landlords with existing tenancies need to have an Energy Performance Certificate (EPC) for their rental property. This EPC needs to be of at least a band E rating. In recent consultation documents, however, the UK government has outlined its plans to increase the minimum EPC rating to a C.
The intention is to improve the energy efficiency of the private rental sector to reduce overall carbon emissions and help us reach the government's ambitious net-zero carbon goals by 2030.
In the consultation documents, they suggest that the minimum band C would come into effect as early as 2025 for new tenancies, and for all tenancies by 2028. Additionally, they’ve also suggested raising this minimum energy efficiency target to a minimum of a B as early as 2030.
What is an EPC?
Energy Performance Certificates were introduced for England and Wales in 2007. An EPC rates a property's energy efficiency on a scale from A to G, with A being the most efficient. At this time, all properties when they’re sold or rented need to have an up to date Energy Performance Certificate.
A better EPC rating means a more energy-efficient home; this can make your property more attractive to renters and buyers as it means the property can be kept warm and damp free more cost-effectively.
How will these new EPC regulations impact landlords?
According to Rightmove, 59% of the private rental sector (PRS) has an EPC of below a C at this time upgrades to get a property's energy efficiency up from a D to a C could cost £1,000s.
In the consultation documents, the government has suggested an expenditure cap of £10,000, and at this time there has been no talk about making funding available to landlords to help finance these necessary upgrades.
To improve an EPC, a landlord can expect to spend money on a variety of things. This includes insulation improving windows from single to double glazing, installing a new, more energy-efficient boiler, replacing old bulbs with more eco-friendly ones, installing smart metres, and even installing solar panels on the property.
Under these new suggested EPC regulations, if you want to advertise your rental from 2025 onwards, you’ll need to ensure that your property is compliant with a C rating or above.
Why you need to start planning your EPC upgrades sooner rather than later
The government currently hasn’t announced any plans to deploy financial assistance for landlords to support these upgrades: whilst this doesn’t mean they won’t, this isn’t something investors should rely on. As such, landlords need to be creating long-term financial projections and plans in order to spread out the cost of these upgrades over the coming years.
There will likely be exemptions as there were for the previous EPC regulation changes for things such as listed properties. Landlords need to find the balance between what’s achievable and what’s cost-effective.
Future-proof your rental business from big changes like EPC
In order to prepare for these upcoming changes, you need to have the tools and data to analyse your properties performance and make long term financial plans. Using a property management software like Landlord Studio, for example, you can easily keep detailed up to date and accurate records of all of your financial data on a property by property and unit by unit basis. This data is then easily accessible through reporting functions allowing you to analyse years worth of data, identify weaknesses, and improve and optimise cash flow.
Finally, you'll be able to make accurate financial projections and plan your future financial expenditures to spread the cost of expensive regulation changes such as EPC.