At Manors, we believe it’s vital we keep our customers on top of all the latest legislation and there are some important changes coming to EPC requirements for rental properties (Energy Performance Certificates).
EPCs were first introduced back in 2007 and, at the time, were the subject of much derision. Our ever-increasing focus on the environment means their importance has been steadily growing and they will soon be hitting centre stage. That’s because, there is currently legislation passing through Parliament, the Minimum Energy Performance of Buildings Bill, which will make it compulsory for all newly rented tenancies to achieve an EPC rating of at least ‘C’ from 2025. From 2028 it will be extended to all tenancies, new and existing, and from 2035 it will apply to all homes for sale.
There is likely to be a transition period but, afterwards, to ensure maximum compliance, there will be a maximum fine of £30,000 for any breaches of the rules. At the same time, the government is pushing lenders to increase the borrowing costs for the most energy inefficient properties.
As the bill has yet to be passed, it is still subject to amendments. However, with our homes responsible for nearly 20% of the UK’s CO2 emissions and the government attempting to burnish its green credentials, there are unlikely to be any significant changes. Most of us would applaud its intentions, but it involves some serious issues (and costs) for the property market. The fear is many older and period properties will be either very expensive or impossible to bring up to a ‘C’ rating.
An EPC measures the energy performance of a property and has 7 bands – ‘A’ to ‘G’– with ‘A’ the most energy efficient. The assessment is carried out by a qualified domestic energy assessor who will look at everything from how well insulated the property is to the heating system it uses and the type of windows it has. The property is then issued with a grading and a number of suggestions as to how to improve its performance.
Only 2% of homes currently achieve an ‘A’ or ‘B’ rating, 85% are ‘C’ or ‘D’ and 13% are between ‘E’ and ‘G’ (source: English Housing Survey). The older the property, the more likely it is to have a poor rating. 47% of Victorian buildings (pre-1900), for example, have an EPC rating of ‘E’ or worse. Rental properties also tend to perform poorly, with around 67% of them below the required 'C' rating. And, according to Rightmove, there are as many as 1.7 million homes in England and Wales that may never be able to achieve a ‘C’ rating.
Before you panic, there are lots of ways you can improve a poor EPC rating, some quick and cheap but others can be expensive. Below is a list of the points required for each grading and the number of points you can add by making changes. Clearly, the more inefficient the original items, the bigger the points boost you’ll get for replacing/improving them:
A - 92 points
B - 81-91 points
C - 69-80 points
D - 55-68 points
E - 39-54 points
F - 21-38 points
G - 1-20 points
A rough guide to points boosters
Loft insulation 270mm + 10-15 points
Cavity wall + 5-10 points
New boiler + 5-20 points
Insulate water cylinder + 2 points
Seal chimney + 1-2 points
Solid wall insulation + 10-20 points
Renewables (ground source heat pump, etc.) + 10 points
Single to double glazing + 5 points
LED lights and draught-proofing + 1 point
If your property is a typical ‘D’ rated one, you will probably only need around 10 extra points to boost your rating up to a ‘C’. The problems come if yours is an older property with a lower rating and you need to start insulating non-cavity walls and floors, replacing all your windows, and installing some kind of renewable heat system. Solid wall insulation will cost around £7,000 for a terraced house and £20,000 for a larger detached one. This can sometimes then cause damp problems for period homes, as they are designed to breathe. A ground source heat pump will cost £20,000 + to install and double-glazing costs about £600/window. It is estimated that the average spend will be approximately £10,000, but a late Victorian house could cost as much as £20,000 to get it up to standard.
There are some suggestions that the legislation might include a price cap for alterations (£20,000) and that listed buildings may get some exemptions. Currently, with the scrapping of the Green Homes Grant, the only government help available is a £5,000 contribution towards replacing your heating system with a greener alternative. They are expected to introduce more grants, but the details have yet to be announced.
The good news is that improving your property’s energy efficiency should increase its value. Nationwide have found there is a 1.7% premium to be paid for a ‘C’, ‘B’ or ‘A’ rated home when compared to a ‘D’ rated one and that premium jumps to 3.5% for ‘E’, ‘F’ and ‘G’ rated homes. The bad news is that the government does not appear to have thought through all the consequences of the legislation. Landlords could easily decide the costs of upgrading their properties are too much and sell up. The supply shortfall would make rents spiral upwards and, at the same time, the oversupply to the sales market could substantially depress house prices. Hopefully, the government will find a way to mitigate these issues before the new rules start kicking in in 2025.
If you are thinking of renting out or selling a home in Marylebone, Mayfair, Hyde Park or Regent’s Park, you will need to get an EPC rating for it. Just give us a call at Manors and we can set you on the right path.