A new study by the Nationwide has found that landlords selling properties with poor EPC ratings are unlikely to suffer huge discounts on their asking prices.
Many landlords are believed to be selling, or considering doing so, because of the return of he EPC C-rating target for rental properties by 2030. The target was first introduced by the Conservative government which then abandoned it: now it is back under the Starmer Labour administration. Additional Net Zero targets for the nation as a whole are focussed on 2050.
The Nationwide says: “Decarbonising and adapting the UK’s housing stock remains critical if the UK is to meet its 2050 emissions targets, especially given that emissions from residential buildings account for 15% of the country’s greenhouse gas emissions. With this in mind, we’ve used our house price data to examine the extent to which owner occupiers pay a premium or discount for a home due to its energy performance rating.
“To do this, we included energy efficiency ratings from energy performance certificates alongside the usual property characteristics we use in our index. This allows us to control for other factors that can influence the value of a house or flat, such as the number of bedrooms, location and whether it is newly built.
“Our analysis suggests that a more energy efficient property, rated A or B, attracts a modest premium of 2.8% compared to a similar property rated ‘D’ (the most commonly occurring rating). There is little difference for properties rated C or E compared with D.”
The Nationwide says there is a more noticeable discount for properties rated F or G - the lowest energy efficiency ratings. Indeed, an F or G rated home is valued 4.2% lower than a similar D rated property.
The analysts conclude: “Our research suggests while energy efficiency impacts remain relatively modest, they have increased relative to pre-pandemic levels, with A/B properties now attracting a larger premium compared with 2019 and F/G properties seeing a larger discount.
“The value that people attach to energy efficiency is likely to continue to evolve, especially if the government takes measures to incentivise greater energy efficiency to help ensure the UK meets its climate change obligations.”
Nationwide’s chief economist, Robert Gardner, says that over the past 10 years, energy efficiency has improved significantly, thanks in part to the higher energy rating of newly built properties. However, the rate of improvement has slowed markedly in recent years.
The latest data (2022) shows 48% of the housing stock is now rated C or higher, up from 18% in 2012.
Gardner comments: “Newly built properties typically have a much higher rating (97% are rated C or above), although the stock increases very slowly, typically by circa 1% per annum. However, it is important to note that while these homes are energy efficient once built, a significant proportion of new homes’ carbon footprint (between 25% and 50%) relates to its construction.
“Government analysis based on the latest English Housing Survey suggests that if all applicable energy improvement measures were applied to all dwellings rated below C, 96% of those would shift into bands A to C, while 4% of dwellings could not be improved beyond a D rating.
“The average cost to improve dwellings to band C was c.£7,400, with an overall estimated total cost for upgrading the entire housing stock of between £91 billion and £94 billion. As expected, dwellings with a rating E to G have a higher average cost to improve than D rated homes (£13,500 vs £6,200).
“The Government’s current aspiration is to upgrade as many homes [owner occupied and private and social rental] as possible to band C by 2035. However, the current pace of energy efficiency improvements is relatively slow, given the scale of the challenge. For example, the rate of insulation installs is a fraction of the 2012 peak, the last year of the Carbon Emissions Reduction Target and the Community Energy Savings Programme.
“This suggests a need for further incentives to help decarbonise homes.”
We're excited to announce that we're working on building a shiny new website for readers of Landlord Today! As part of this process, commenting on articles will be temporarily disabled. We look forward to sharing our new and improved Landlord Today website with you shortly!
4
.png)
(1).png)
