Planning your finances to comply with the new EPC requirements

It’s a challenging time for property owners with the cost of living crisis and escalating energy bills. Added to this, for many landlords there’s another significant issue looming on the horizon – the introduction of new minimum energy efficiency standards for rental properties.

As part of the Government’s Net Zero 2050 target, the new Energy Performance Certificate (EPC) rules are aimed at reducing the carbon footprint of rental properties across the UK. Although the changes are still at the proposal stage, landlords need to understand what it means for them so that they can plan for any property improvements they’ll need to make and the financial impact it’ll have.

Energy performance matters

Today, all rental properties must achieve a minimum EPC rating ‘E or above’ to be commercially let. Under the current proposals, from April 2025 it will be compulsory for newly rented properties to achieve a minimum EPC rating of ‘C or above’ and from April 2028 it’ll apply to all existing rental properties.

At the same time, the maximum cost cap to bring a property up to standard will be raised from £3,500 to £10,000. If the property still doesn’t achieve an EPC of ‘C or above’, landlords can register for a five-year exemption.

In addition, a ‘fabric first’ policy will be introduced. This means that improvements to the fabric of the building i.e. insulation, windows and doors, must be completed before additional measures such as a new heating system can be installed.

The impact of these changes will depend on a number of factors including the type, condition and number of properties a landlord owns but it will be a challenge for many, with some requiring significant investment to comply.

According to the Government, there are currently around 3.2 million rented properties with an EPC rating of D or below. Furthermore, over a third of rented properties were built before 1940* and will be unlikely to meet minimum standards including many large, complex property portfolios or older, less energy-efficient buildings such as Houses in Multiple Occupation (HMOs).

Improving your properties’ EPC ratings

As a minimum, every landlord should know the current energy efficiency rating of each of their properties. An accredited energy performance assessor will produce a report with recommendations and estimated costs for energy-saving improvements such as:

• Installing loft and/or cavity wall insulation
• Upgrading to double-glazed windows and doors
• Replacing central heating systems/boilers
• Installing energy-efficient lighting

Once you know what’s required, you can make an informed decision about the steps needed to future-proof your buy to let property.

Better EPC ratings attract higher-paying tenants

Climate change and energy efficiency are now high on the agenda for many people when it comes to choosing a place to live. Research by L&G** shows there is an acceleration in consumer demand for energy-efficient housing and this shift in behaviour is expected to have significant implications on the value of low-carbon homes. It highlights that, after location, good insulation and lower energy bills are the next most important criteria when selecting a property.

In addition, results revealed that tenants are willing to pay a 13% premium for a low-carbon home.

Finance for energy-efficient properties

In the current economic climate, finding the right finance has become a tricky issue for many landlords, but whether you need a remortgage, bridging loan, portfolio consolidation or re-structuring, the best approach is to seek professional, tailored advice from an independent specialist buy to let mortgage broker such as Vincent Burch Mortgage Services.

Buy to let mortgage advice and more

Our expert team of buy-to-let mortgage advisers are ready to help you get the correct finance you need to complete your energy improvement plans. Understanding your circumstances is our priority and as a whole-of-market broker we have access to a range of specialist lenders and products, including a number of green buy-to-let mortgages that offer lower rates.

We can discuss the proposed EPC changes, the likely impact on your portfolio and help you identify the most appropriate way to finance your property improvements.

Take advantage of our buy-to-let mortgage and property market knowledge today, call our friendly team on 01603 851534 or email [email protected].

Sources:
* Shawbrook Bank White Paper – Confronting the EPC Challenge
**L&G/YouGov research, Jul-Aug 2022