Agency warns landlords to be saddled with new EPC costs

Proposed minimum energy efficiency standards regulation in England could leave residential landlords facing a £17.9 billion bill, a lettings agency warns.The government’s proposal for all rental properties to have a minimum EPC rating of C by 2025 will add pressure to those already faced by landlords and may lead to many exiting the sector, according to Knight Frank.

Whilst some 13 per cent of renters are willing to pay a premium for a low carbon property, the average annual rent in 40 per cent of local authorities wouldn’t cover the average £9,260 spent to bring a property up to EPC C.

While still at consultation stage, the legislation is expected to require rental properties to have an EPC rating of C or above by December 31 2025 for new tenancies and by December 31 2028 for all existing tenancies.  Note that iHowz have been consisyently asking for clarity on this – see our campaign.Current regulation, in place since 2020, dictates all tenanted properties be rated EPC E or above, notwithstanding exemptions.

Should the legislation pass, Knight Frank believes this will place a greater urgency on the private rented sector to improve the energy efficiency of stock than the broader ambition to have all homes up to EPC C by 2035.

Of the 4.8 million households in the private rented sector across England, some 60 per cent have a rating of EPC D or below.

Just 2.4 per cent have an EPC rating of F or G, falling below the current legal for a minimum EPC E, which is an indication of the level of exemptions in line with current regulation. These exemptions include listed properties and properties where the cost of even the cheapest recommended improvement exceeds £3,500.

Under the proposed legislation, the cost exemption is likely to rise, with many speculating a cap of £10,000, bringing many more properties into the fray.

Previous Knight Frank research found that the average cost spent to upgrade a dwelling previously rated EPC band D or below to at least a band C is £9,260. Though this varies, properties with an EPC rating in band D, for example, typically spent £5,500 on the necessary improvements to move to band C, with this figure doubling to over £10,000 on average for properties in bands F and G.

By applying these cost estimates to the private rental sector, omitting exemptions and placing a maximum spend of £10,000, Knight Frank calculates the total bill for landlords to upgrade to the minimum requirement of an EPC C is an estimated £17.9 billion.

The greatest expense is expected to be borne by landlords in London, at £3.2 billion. This is driven by the prevalence on private rental households in the capital (a fifth of the total), rather than a reflection of the quality of existing rental stock.

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