Rental Properties in the UK will have to demonstrate their green credentials and raise minimum energy efficiency standards through higher ratings on Energy Performance Certificates by 2025, increasing from an “E” rating to a “C” rating by the deadline. And older, draftier properties could be hit hardest as improvements to loft and wall insulation, windows and doors, and even replacement of some white goods and boilers may be on the cards.
Gavin Perrett, Director at Hawkhurst Invest, a property investment consultancy based in Essex said, “In March this year we reported on forthcoming changes to buy to let landlords. There were a number of changes expected including Capital Gains Tax, Making Tax Digital for VAT, and the Renters’ Reform Bill. And of course, Energy Performance Certificates.”
Some landlords including accidental landlords, people with property investments who are reaching retirement age, and small landlords may simply not be prepared to take on the additional investment to bring their property portfolio up to standard. Those landlords are likely to put their properties on the market for a quick sale. Property sales are currently completed in around 150 days, which is quick, so they may choose to sell up now to extract their equity rather than commit to the long term.
While the new EPC Certificate rules are bad news for some buy-to-let landlords, for other investors the picture is different. With rental properties coming onto the market for quick sales, investors could secure new properties quickly, and even at lower than market rates to secure quick sales for vendors.
For renters there is a benefit too as the quality of properties will improve over the long term. With improved energy efficiency and lower running costs, which at a time when inflation, interest rates, and the cost of living is rising quickly, having an energy-efficient home is a clear benefit.
Gavin Perrett said, “the introduction of increased requirements for Energy Efficiency Certificates is a mixed bag. Investors who take on additional properties are able to grow their portfolio, but may have an additional burden of investment to bring properties up to standard.”
Continuing, Mr. Perrett said, “As property standards are improved landlords are likely to be able to command higher rent and therefore a higher rental yield. Some landlords will lose out as they decide to sell, possibly below market value, and for tenants, they could be paying higher rents, but for properties that have been upgraded to a higher standard.”
There are some exceptions to the new EPC rules. Existing tenancies won’t have to meet the standards until 2028. Listed buildings also have some flexibility too. Owners of listed properties will have to consult their local planning departments. There may be exceptions if improvements to properties change the fabric or appearance of the property.