Landlords face a £24bn bill to make rental properties more energy efficient
New research from leading property technology provider Reapit reveals that an estimated 2.7 million rental properties across Great Britain will need to be retrofitted with some form of energy efficiency measure, to hit new government EPC targets by 2030.
Reapit reviewed a representative sample of rental properties managed using its platform to estimate how many properties currently fall below EPC C. Based on historic retrofitting costs from the 2021 – 2022 English Housing Survey (adjusted for inflation), landlords could face an estimated bill of £24.03 billion to bring those properties up to the new standard. This equates to over £10,000 per landlord.
New target revealed
On 18 July, new Secretary of State for Energy Security and Net Zero, Ed Miliband announced in parliament that the government will "demand that landlords raise the standard of their accommodation to a proper energy performance certificate standard C by 2030."
A similar policy which the previous government dropped in 2023 contained several exemptions and cost caps. It remains to be seen if any similar measures will be announced by the new government, as this level of detail is currently missing from the latest proposals.
A recent survey for Energy UK revealed that 35% of respondents did not make any energy efficiency improvements in 2023, as they could not afford the upfront costs. This suggests that support in meeting these costs will be crucial in convincing some landlords to retrofit their properties.
"Urgent clarity needed"
"Our report reveals the sheer scale of the work ahead. While we all recognise the need to address the greenhouse gas emissions from housing in the UK, this cannot come at the cost of people's homes," said Steve Richmond, General Manager UK&I at Reapit.
"Bringing forward proposals that require such a high spend without outlining the support measures on offer to achieve these ambitious targets risks spooking landlords, so urgent clarity is needed. The last thing tenants need is more landlords selling up. Not only will it push up rental prices, but tenants will face the stress and upheaval of moving."
A recent PayProp survey shows that 50% of tenant moves last year were due to landlords selling, while only 4.1% of landlords planned to buy more properties.
"Anything that accelerates this trend will only harm tenants," explained Neil Cobbold, Commercial Director of Reapit | PayProp.
Agents have a role to play
"If landlords do sell stock rather than retrofit, encouraging them to reinvest in the PRS will be critical. Sales and letting agents will be best placed to advise on the investment conditions and regulations impacting the sector."
Sales stock that generate higher yields and can be cost-effectively retrofitted may appeal to investors.
"There are also opportunities for agents to build profitable relationships with reliable local tradespeople who can help landlords retrofit properties. Minimising the void time will be crucial for landlord profitability," added Cobbold.
Industry next steps
"Now that the minimum EPC C standard has been revealed, agents, landlords and tenants need to work with MPs to plan how to achieve this target. In less than six years we need to collectively retrofit 2.7 million homes, most of which will have tenants in situ.
"Critical for tenants, landlords and agents alike will be clarity from the government on what funding and measures will be available to make the PRS EPC C 2030 target a reality."
To see the energy performance of the private rented sector in England, Wales and Scotland, download the Reapit special report.
