Energy performance certificate (EPC) shake-up: what you need to know

As you might have seen in the news recently, the government has decided to scrap the much-discussed EPC changes for rental properties. In this article, we delve into the depths of this unexpected turn of events, exploring what it means for you, for your tenants, and for the future of rental properties in England.

EPC Changes: A Brief Recap

The EPC changes were poised to revolutionise the landscape of rental properties in the UK. Landlords were initially tasked with ensuring their properties achieved an EPC rating of C or higher, with a two-phase implementation – new tenancies by 2025 and all tenancies by 2028. The goal was clear: to improve the energy efficiency of rental homes and reduce the carbon footprint of the rental sector.

However, earlier this year, the government modified the timeline. In March 2023, the new directive shifted the deadline for all rental properties to have an EPC rating of C or better by 2028. Simultaneously, it announced a substantial penalty increase for non-compliance, raising the stakes from £5,000 to a staggering £30,000.

All Change on the Horizon

In a surprising move, the government has now decided to abandon the entire EPC initiative. Instead, their new approach is centred on encouraging landlords to voluntarily enhance the energy efficiency of their properties. The implications of this reversal are far-reaching. But is this a cause for celebration, or should landlords continue to focus on improving their EPC ratings? Let's delve deeper.

Landlords Already Ahead of the Curve

Many landlords had already embarked on the journey to meet the original EPC deadline of 2025. A study conducted by Shawbrook Bank reveals that a remarkable 80% of landlords were well-prepared for the initial timeline. Among them, 30% already boasted properties with an EPC rating of A to C, while an additional 50% had concrete plans to enhance their properties' EPC ratings by 2025.

The research also paints a picture of a proactive industry. Nearly half of landlords invested in their properties over the past year, with an average expenditure of £25,148. This figure climbs even higher in the capital, where London-based landlords invested a substantial £37,164 on average.

So, it begs the question: is it still worth the effort to improve EPC ratings despite the government's change of heart?

The Future of EPC Ratings

While the government may have abandoned its proposed EPC changes, it's essential to consider the ever-shifting political landscape. With a general election looming on the horizon, likely in 2024, the fate of EPC regulations remains uncertain. Ed Miliband, the shadow secretary for climate change, has already expressed concerns about the energy efficiency of UK homes, suggesting that a change in government could resurrect the EPC rules.

If the Labour party wins the election, there is a real possibility that stringent EPC requirements could be back on the table. Thus, you should remain vigilant and prepared for potential regulatory shifts.

Tenant Attraction: A Tangible Benefit

While the immediate threat of EPC changes has subsided, there are still compelling reasons for you to consider enhancing the energy efficiency of your rental property. One of the most tangible benefits is the ability to attract and retain tenants.

Energy costs have been a significant concern for tenants, even with the recent decline in energy prices. As a result, many renters are actively seeking properties that are energy-efficient and cost-effective to heat. By investing in energy-efficient upgrades, you can position your property as a desirable choice in the rental market.

The Future of Energy Efficiency: Other Notable Changes

In addition to scrapping the EPC changes, the government has introduced several measures related to energy efficiency, some of which may be of particular interest to you:

The Boiler Upgrade Scheme Grant: This grant is set to increase to £7,500, providing landlords with financial support to transition from gas boilers to more eco-friendly alternatives like air source or ground source heat pumps. You can check your eligibility for this scheme, which offers a significant incentive to improve energy efficiency.

Oil and LPG Boiler Installations: In off-gas-grid homes, landlords will now have an extended timeframe until 2035 to install oil and LPG boilers. Originally slated for phase-out in 2026, this extension offers flexibility to landlords with properties in remote areas.

Exemptions for Fossil Fuel Boilers: As the UK moves towards a greener future, fossil fuel boilers, including gas boilers, are set to be phased out by 2035. However, the government has recognised that certain households may face significant challenges in transitioning to heat pumps or other eco-friendly alternatives. To address this, exemptions will be granted for homes that require expensive retrofitting or substantial electricity upgrades, covering about a fifth of homes.

Conclusion

In the ever-evolving world of property letting, adaptability and foresight are key. While the government's decision to scrap the EPC changes may have provided temporary relief for landlords, the future remains uncertain. Political landscapes can shift, and with a general election looming, the spectre of stringent energy efficiency regulations may return.

In the meantime, you have an opportunity to proactively improve your rental property's energy efficiency, attracting environmentally conscious tenants and future-proofing your investment. With government grants and incentives available, now may be the perfect time to embark on this journey.

As property management experts, we understand the importance of staying informed and adapting to industry changes. We encourage you to explore the possibilities presented by the evolving energy efficiency landscape, positioning your rental property as not only compliant but also sustainable and appealing in the eyes of today's discerning tenants. In the unpredictable world of property letting, one thing remains certain: knowledge is power, and preparedness is key to achieving peace of mind on your landlord journey.