A property finance company says increased taxes and regulations for the private rental sector mean that energy efficiency improvements to raise EPC ratings are often put on the back burner.
“It’s currently a legal requirement that rental properties have both an EPC and a minimum rating of E. However, the government’s new aim is to increase this to a C rating by 2028 and around two thirds of current PRS stock sits below this threshold” explains Jonathan Samuels, chief executive of Octane Capital.
He continues: “This means that many tenants will already be paying considerably higher energy bills than they would in a more energy efficient home and this cost is set to climb significantly higher this year.
“While the government has committed to ensuring new rental homes meet a minimum standard, it’s fair to say they shoulder some of the blame where existing rental properties are concerned.
“The cost to improve a property’s rating to a C is substantial and many landlords simply don’t have the financial resources to do so, having seen the profitability of their portfolio dwindle thanks to legislative changes to tax relief and an increase in stamp duty when purchasing a buy to let home.
“It’s yet another example of how the government’s campaign against landlords has been inadvertently detrimental to tenants and why we should be encouraging buy-to-let investment in order to raise standards across the sector.”
Octane says its analysis of the market suggests just 33 per cent of current properties in the private rental sector across England and Wales currently boast an EPC rating of C or above. That’s just 1.6m homes out of a total of 5m.
It’s also estimated that the cost of bringing these rental homes up to a C rating sits at a minimum of £7,646 per property, with the total cost of improving PRS energy efficiency hitting £25.7 billion.
London is home to the most energy efficient private rental market in England and Wales: 41 per cent of the capital’s rental properties have an EPC rating of C or above, equating to 424,460 homes.
However, the sheer size of the London rental market means that the remaining 59 per cent would also require the largest budget to bring them up to standard - totalling £4.7 billion.