Improving the Energy Performance of Privately Rented Homes

The lawyer, David Smith has published an excellent article on the recent Government announcement on another EPC consultation.  It can be seen here, and says:

The Government has launched a new consultation titled “Improving the Energy Performance of Privately Rented Homes.” This serves as a 2025 update to the previous consultation held in 2020. This consultation addresses the need for higher energy performance standards across the Private Rented Sector. Currently, under Minimum Energy Efficiency Standards (MEES), domestic rental properties must meet at least an EPC grade E rating.

Although much discussion has revolved around achieving EPC grade C, the government’s approach is broader. They intend to overhaul the energy efficiency framework, incorporating insights from prior government initiatives and an ongoing consultation launched late last year.

The proposed changes are intricate, but in essence, the government aims to shift away from the current EPC letter grading system, which estimates heating and lighting costs, to a more detailed set of key performance indicators. Landlords will need to meet requirements under the “fabric performance metric” and either the “heating system metric” or the “smart readiness metric.”

This shift is well-founded. A property with extensive solar panels may achieve a high EPC rating despite poor insulation, resulting in a drafty, inefficient home that is difficult to heat. While operational costs may remain low, the rating does not truly reflect the home’s energy efficiency.

The fabric performance metric assesses the property’s insulation quality and thermal efficiency. Essentially, it gauges how well the property retains heat. The heating system metric evaluates the system’s efficiency, effectiveness, and environmental impact. The smart readiness metric determines how well the property integrates smart technology and allows tenants to capitalize on cost-saving smart tariffs. While these metrics align closely with EPC grade C in effect, the government emphasizes that the method of achieving compliance will differ.

providing landlords with limited time to make necessary improvements.

The updated standards are set to apply to new tenancies from 2028 and all tenancies from 2030, providing landlords with limited time to make necessary improvements.

According to government estimates, most landlords will need to invest around £6,500 to comply with the new standards. However, a proposed spending cap of £15,000 would allow landlords to register a ten-year exemption after reaching that limit. It is expected that after this period, further investment may be required to renew the exemption. This cap exceeds the £10,000 limit proposed in 2020, and the government is seeking feedback on which cap should be implemented. A notable clarification is that the £15,000 cap includes VAT, effectively lowering its real-term impact. Since the expected average cost for most landlords is around £6,500, a £10,000 cap would cover most cases, while raising it to £15,000 may result in diminishing returns for a higher cost.

A key frustration for landlords is that the spending cap will not take effect until 2026, meaning there is little incentive to undertake improvements beforehand. This delay may discourage landlords from making upgrades over the next 12 months.

The consultation is open until 2 May, and there is an online response form available for submissions.