Costs of meeting energy performance standards

Since April, landlords have been required to ensure properties they let reach a minimum of Band E for energy performance. Those whose properties fail to make the grade can’t agree a new tenancy unless the cost of improving the EPC exceeds £2,500. That cap has just been increased to £3,500.

The numbers of properties affected could be substantial. Estimates put the numbers of rental properties falling in Bands F and G to be around 280,000. Fuel poverty campaigners have quoted figures which suggest tenants living in these properties face annual fuel bills that can be £1,000 more than those for average households. These campaigners have long been arguing that the cap should be £5,000. At this level, far more landlords would be forced to upgrade their insulation and heating systems, leaving just a few thousand homes where the cost would be excessive.

Cost of upgrades

While averages suggest upgrades cost around £1,200 and save tenants £180 a year, every landlord’s situation differs. For those facing voids, higher taxes, arrears, or legal costs, funding improvements can be difficult. While no one should live in poor conditions, landlords need consistent policy and adequate notice of changes.

There will be landlords whose business model isn’t resilient enough to handle such a sudden move. Some might argue that they shouldn’t be in the business of property rental but imagine a scenario of a property that needs loft insulation, a new boiler and upgraded glazing at a cost of £3,000.  Previously that £3,000 would be in the landlord’s pocket. Now he’s forced to spend it, irrespective of the wishes of the tenant and irrespective of the level of rent. £3,000 on a single property as a one-off hit?

Slim margins

Despite what the Government might think, for many landlords, margins are slim. Property rental is a business – it’s not the charitable provision of housing by kindly benefactors with limitless wealth. Tenants may save money on their heating bills after improvements are made, but when a tenancy comes around for renewal, their rent may have to increase.

About 200,000 landlords have properties that could be affected. I’d advise every one of them to start looking now for any funding available to support the EPC upgrades their property needs. It’s likely that the cap will increase again, probably to the level of £5,000, and as properties that need more work start to get updated, the grant funding available may well be eaten up.

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