A recent survey reveals a significant number of landlords are unprepared to meet upcoming EPC targets.
- 67% of landlords have properties failing to meet Band C energy efficiency standards.
- There is a substantial knowledge gap concerning EPC requirements among landlords with larger portfolios.
- Many landlords are contemplating property sales rather than improving energy efficiency.
- Funding improvements remains a challenge, with landlords relying mainly on savings, rent increases, and government grants.
In a detailed survey conducted by Pegasus Insight for Foundation Home Loans, findings indicate that just over two-thirds of landlords hold at least one property that does not comply with the proposed Energy Performance Certificate (EPC) Band C standards set by the government. This data stems from 720 online interviews carried out in the third quarter of 2024. The government has announced intentions to make it mandatory for private and social rented homes to reach at least an EPC Band C by the year 2030, marking a significant shift in property regulation.
Current regulations allow private rented properties to be let with an EPC Band E rating, with no minimum energy efficiency standard for social rented homes. Despite 92% of landlords acknowledging awareness of EPC standards, only 67% profess a comprehensive understanding. Notably, landlords managing portfolios with four or more buy-to-let mortgages demonstrate slightly reduced comprehension, with only 62% claiming to fully understand the requirements, compared to 69% of less encumbered landlords and consumer borrowers.
When it comes to planning for compliance, 42% of landlords indicated their intention to undertake necessary improvements to align with these standards. From this group, 24% plan to complete minimal-cost efforts to continue letting, 14% focus on enhancing long-term property value, while a minority of 3% aim to meet the standards before selling the property. Conversely, 34% of landlords are opting to sell or not re-let without making improvements, and 17% have opted for unspecified approaches, while 3% plan no works at all but continue letting their properties.
The financial aspect of these improvements represents a major concern for landlords, with most intending to utilise savings (71%), increase rents (42%), or seek government grants (28%) to cover the costs. A small percentage also consider leveraging equity from their properties (12%) or applying for additional advances from lenders (5%). It is estimated that the average cost per property to achieve the target is around £12,000. Planned enhancements largely focus on insulation, with 37% looking at solid wall or floor insulation, 26% considering loft insulation, 25% upgrading boilers or heating systems, and 22% installing solar PV panels. Nevertheless, a considerable 13% remain unsure about the specific improvements required, and 37% are uncertain about the total potential costs involved.
Grant Hendry, director of sales at Foundation Home Loans, highlighted the importance of addressing energy efficiency to prevent future financial pitfalls for landlords. “With potential new legislation aiming to raise energy efficiency standards and tackle fuel poverty for millions, landlords face important decisions around future-proofing their investments from an EPC perspective,” he noted. This situation presents significant opportunities for lenders and intermediaries to offer support through green mortgage products tailored to meet both regulatory changes and landlords’ needs.
The landscape for landlords is rapidly evolving, underscoring the necessity for strategic adjustments and comprehensive understanding of new energy standards.
