With a new administration in place in the UK, we are all patiently awaiting changes – and we haven’t had to wait long. The UK government has embarked on a significant overhaul of energy efficiency standards for rental properties, signalling a robust commitment to reducing carbon emissions and enhancing the sustainability of the housing sector.
These changes, while aimed at creating a greener rental market, pose substantial challenges for landlords who have, and will continue to navigate a complex regulatory environment. Some of the key changes have included everything from financial support and initiatives to energy efficiency standards and here, we’re exploring what they are and what they mean for Landlords.
The Escalation of Energy Efficiency Requirements
The new Labour government have recently announced key energy-related changes designed to help improve efficiency and manage high energy costs. A cornerstone of this new strategy is the progressive tightening of Energy Performance Certificate (EPC) ratings for rental properties. Landlords will now be expected to ensure that their properties meet a minimum EPC rating of C by 2030. The previous government had similar plans as we discussed last year, but these were scrapped before they could make it to fruition.
Initially, the previous government had set a target of achieving a minimum EPC rating of C for all rental properties by 2028, but following the scrapping of this, the current government is currently assessing the feasibility of implementing this more stringent standard by a slightly later date of 2030. The rationale behind these increasing EPC requirements is clear: to reduce the carbon footprint of the rental sector and improve the energy efficiency of homes, which can lead to lower energy bills for tenants. However, landlords face the burden of substantial investment to upgrade their properties to meet these standards.
There has been talk of a phased approach to these standards, with implementation originally planned as follows:
- Phase 1 – All new and renewed tendencies to comply by the end of 2025
- Phase 2 – All existing tenancies to comply by the end of 2028
Given the changed deadline to 2030, these phase dates could change, particularly with growing concerns that 2025 is too close for Landlords to feasibly make changes by.
Financial Support and Incentives
Recognising the financial implications for landlords, the government has introduced support mechanisms to facilitate compliance. These include:
- Grants: While the Green Homes Grant scheme has concluded, other grant options may be available depending on the region and specific circumstances. Landlords are encouraged to check with their local authority for potential funding opportunities.
- Loans: The government provides a range of low-interest loans to assist landlords in financing energy efficiency improvements. These loans can be a valuable tool for spreading the cost of upgrades over time.
- Exemptions: Several exemptions are being discussed and put in place to help those who may not be able to meet the deadlines. These include:
- High Cost – if the cost of improvements exceeds a set limit
- All Improvements Made – If you’ve made all possible improvements and the property still doesn’t reach the required EPC rating
- 7-year payback – If the cost of repairs can’t be or won’t be recouped within 7 years of energy savings
- Consent – If you need additional permissions or consent that can’t be acquired
- Wall Insulation – If insulation would negatively impact the property in any way, you may be exempt
- Devaluation – If improvements would devalue the property
- New Landlord – If you are a new landlord for the property, you may be exempt from the deadline.
Exemptions need to be applied for through a claim made. This includes identifying the exemption, gathering necessary documentation and evidence, submitting the application and awaiting approval or further instruction.
Impact on the Rental Market
The introduction of higher energy efficiency standards is likely to have a profound impact on the rental market. This could include:
- Increased costs for landlords: Upgrading properties to meet the new standards can be expensive, requiring significant investment in insulation, heating systems, and other energy-efficient measures.
- Potential rent increases: To recoup the costs of improvements, some landlords may increase rental prices. However, it is essential to consider market conditions and tenant affordability.
- Energy Savings – While the initial costs may increase, savings in energy costs may help to reduce the cost of rent or property management for tenants and landlords respectively.
- Reduced property supply: Landlords with older, less energy-efficient properties may find it economically challenging to comply with the new standards. This could lead to a reduction in the overall supply of rental properties.
- Improved property desirability: Properties with higher EPC ratings are generally more attractive to tenants, as they often offer lower energy bills and a more comfortable living environment.
The net effect of these changes on the rental market will depend on various factors, including the availability of financial support, the cost of energy efficiency measures, and the overall economic climate.
Looking Ahead
The UK’s commitment to achieving net-zero carbon emissions by 2050 means that the regulatory landscape for landlords is likely to continue evolving. Landlords need to stay informed about upcoming changes to avoid penalties and to capitalise on opportunities to improve their properties.
To navigate the complexities of the new energy efficiency standards, landlords are advised to seek professional guidance. Energy efficiency experts can provide tailored advice on compliance, identify potential cost-saving measures and assist with accessing available support. By investing in energy efficiency improvements, landlords can not only meet their regulatory obligations but also enhance the long-term value of their properties, improve tenant satisfaction, and contribute to a more sustainable future.
Here at Ashburnham Insurance, we are on hand to help when it comes to navigating insurance and energy efficiency and improvements. Get in touch with a member of our team for information and support on FREEPHONE 0800 1696137.