Revealed - landlords must spend thousands to meet EPC standards

Landlords will have to spend thousands to meet new government demands to improve energy efficiency in rental properties.

Geospatial technology company Kamma has released its analysis of the proposed increases to Minimum Energy Efficiency Standards in the private rental sector.

With 2.9m homes needing to improve, and an estimated average cost of £9,872 per home, Kamma says the total bill facing the sector could hit £29 billion.

Last week the government introduced the Minimum Energy Efficiency of Buildings Bill. Kamma’s analysis of its provisions raises key questions, it claims. The first of these is around costs and responsibilities. 

Kamma’s analysis of the EPC register for private rental sector properties highlighted a gap in efficiency, with 65 per cent of below the target of EPC grade C, compared to a national average of 58 per cent on all properties irrespective of tenure. It would cost £29 billion to improve these rental units.

Meanwhile Kamma says cash support has been reduced from the £1.5 billion Green Homes Grant to just £562m in the form of a nationwide home upgrades fund targeting low income families.

Chief executive Orla Shields says: “The bill itself is a hugely important step in the right direction: it’s right to target poorly performing housing stock at this crucial time in the fight against climate change. More consideration needs to be given, however, to who and how this is going to be paid for. 

"An increase in minimum EPC E to C is a dramatic rise and landlords won’t see any short-term benefits from lower fuel bills. Government policy is all stick and no carrot at this point.”

The second question raised by Kamma is on exemptions, which are yet to be finalised but, based on existing standards, create loopholes. 

Landlords under the current minimum rating of E need to invest only up to a maximum of £3,500, which means 120,000 rental properties may theoretically still be let out after that expenditure even if they are sub-standard.

Similarly the ‘all improvements made’ exemption qualifies an additional 1,000 that have run out of viable upgrades. 

Kamma contends that the obvious challenge is that both these categories of exemption will cover far more properties as the MEES is raised. The increased cost associated with increased targets means an additional 2.1m properties could qualify as exempt, equal to 73 per cent of the private rental sector.

One proposal contained in the new Bill would see the maximum investment increase to £10,000 but this would deliver a huge affordability challenge to the market and create an incentive for non-compliance, claims Kamma.

There are three per cent of rental homes below the current MEES rating of E but this number is expected to rise dramatically when the new minimum becomes C. 

Kamma says this either leaves 2.8m tonnes of emissions from UK homes still pumping into the atmosphere each year, punching a hole in the Net Zero strategy for property, or would be a big cash hit on landlords, who may then decide to either not comply or leave the sector.

It also raises the question of fairness as it penalises landlords that have properties in-line with the market average of EPC D and therefore needing a cheaper route to C, whilst landlords of the worst performing properties are likely to quickly hit a cost ceiling.

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