Financial Strain on Landlords

For individual landlords, the estimated average cost is around £10,000 per property. While this might be manageable for properties in high-value areas like London and the South East, it poses significant challenges for properties in less affluent regions. For instance, in cities like Newcastle upon Tyne, this cost could represent up to 20% of a property’s value. Given this, it’s not surprising that a survey by Skipton Building Society found that 39% of landlords might consider selling their properties rather than investing in such costly upgrades.

The Risk of a Sell-Off

The potential sell-off of rental properties is a critical issue. If a significant number of landlords choose to exit the market rather than retrofit their properties, it could lead to a reduction in available rental housing, driving up rents and exacerbating the housing crisis. According to Energy UK, 35% of respondents already struggled to afford energy efficiency improvements in 2023, a situation unlikely to improve in 2024 despite high buy-to-let yields.

Slow Progress Towards EPC C

Current retrofitting rates suggest that it could take until 2042 to bring every property in the PRS up to an EPC C standard, far beyond the 2030 deadline. This highlights the need for a more aggressive and coordinated approach to meet the target. The industry must collaborate with the government to identify a mix of grants, tax incentives, and interest-free loans to make these upgrades financially viable for landlords.

Role of Lenders and Inflation Control

Lenders could play a crucial role by offering financial products that allow landlords to borrow against the future value of their property after retrofitting. However, managing costs is also critical. The surge in demand for retrofitting could drive up costs for materials and labor, exacerbated by a looming skills shortage. The UK needs to ramp up investment in training programs and apprenticeships for tradespeople like heating engineers, glaziers, and insulation specialists to meet this demand.

Addressing Properties That Can’t Be Upgraded

The UK’s older housing stock presents additional challenges, as some properties may not be economically or technically feasible to upgrade to an EPC C. Losing these properties from the PRS could reduce the housing stock by over 17%, driving up rental prices further and worsening the housing crisis. To prevent this, the government must work with the industry to develop a workable exemption scheme that retains these properties in the PRS while still aiming to improve overall energy efficiency.

The Need for Collaboration

Achieving the EPC C target by 2030 will require a collaborative effort involving multiple government departments, devolved administrations, local authorities, and the property industry. This collaboration is essential to make the goals set for landlords attractive, affordable, and achievable. If the industry and government can work together, they can find solutions to these complex challenges and prevent a scenario where tenants bear the brunt of a reduced and more expensive rental market.

The government’s willingness to engage with and support the industry will be crucial in ensuring that the necessary upgrades are made without triggering a mass sell-off that could worsen the housing crisis.