EPC changes: how much could it cost you?
Do you have a Buy to Let? Proposed EPC changes mean you’ll need to undertake expensive work if you’re a landlord with rental properties that have low energy efficiency ratings. Read on to find out what these changes are, how much it could cost you as a landlord and if there are any exemptions.
April 27, 2022
5 minute read
How are EPCs changing?
An EPC or Energy Performance Certificate ranks properties in terms of energy efficiency. The most efficient properties are rated A, while the least energy efficient are rated G. An EPC certificate needs to be provided to tenants if you let the property and also to potential buyers if you’re selling your home.
Currently, to let out a rental property it must have an EPC rating of at least E.
But under the new Minimum Energy Performance of Buildings Bill the government wants to increase this to a minimum EPC rating of C for new tenancies from 2025 and for all rental properties by 2028, where practical, cost-effective and affordable.
It is also proposed that the penalty for not having a valid EPC will be increased from £5,000 to £30,000 from 2025.
The government hopes this change will make homes more energy-efficient and cut carbon emissions as part of its target to be net-zero by 2050.
However these proposed changes have yet to become law so it’s possible they may change. Sign up to our newsletter so we can keep you updated.
Are there any exemptions to proposed EPC changes
Yes, some properties are exempt. These include listed buildings or buildings with restricted covenants if the improvements would unacceptably alter their appearance. Some temporary homes or those used for less than four months a year are also exempt.
EPC changes for landlords: How much will it cost?
So how will these EPC changes for landlords affect you? This will depend on how energy efficient your rental properties are. So if your buy to let has an EPC rating of C then the proposed changes won’t affect you. However if you own rental properties with a rating of D or E and you’re not exempt then, assuming these changes become law, it’s likely to hit you in the pocket.
You will not be expected to stump up for unlimited environmental improvements though. That’s because under the current rules if you cannot improve your property to EPC rating E for £3,500 or less, you should make all the improvements which can be made up to that amount, then register an ‘all improvements made’ exemption.
However under the proposed changes this threshold looks set to increase to £10,000. And the government estimates the average cost to landlords of making improvements to reach an EPC C rating is around £4,700.
How you can prepare for EPC changes for landlords
There are lots of steps you can take to prepare for these proposed changes:
- Check your EPC ratings: If you don’t know the EPC rating of your rental properties then check them. You can search for your property on the government’s EPC register. And when you check your certificate, as well as seeing the band your property is rated as you’ll see a number too, this is known as your ‘SAP score’. This number indicates whereabouts within the band your property currently sits. So if you’re already very close to the next band up it could be that by just making some simple changes like installing energy efficient lighting you may be able to move up into that band. Read our guide on the top projects to make your home more energy efficient.
- Find out about support: Look into whether it’s worth taking advantage of the government’s Boiler Upgrade Scheme. With it you can apply for grants up to £6,000 to switch from a gas boiler to a more efficient heat pump. Also, did you know that in his Spring Statement Chancellor Rishi Sunak removed VAT on the installation of solar panels?
- Think about funding now: And if it looks like you will need to undertake quite major work then think about how you’re going to fund it sooner rather than later. So if you’re planning to remortgage then now may be the time to consider releasing equity to pay for the improvements. And if you’re planning to improve your property’s energy efficiency it may be that a green mortgage is a good option. But as always with mortgages you’ll want to make a fully informed decision. So to find out what’s the right option for you get fee-free advice from our partners at award-winning mortgage brokers L&C.
I’m a landlord, should I pay for these changes or sell up?
These changes have yet to become law so while exploring your options is always a good idea you may wish to hold off making any big decisions until these changes are definite.
However if these changes do go ahead it has the potential to cost some landlords a lot of money. Not only will some landlords face costly upgrades to their properties they may also require their tenants to move out for a period while the work is undertaken.
And if you’re a landlord and you fail to meet the deadline to meet the new minimum EPC rating you won’t be able to rent out your property until you do.
But while there’s no doubt that making these changes could be expensive you could see an uplift in your property’s value if you make energy efficiency improvements.
A new study from Savills found a third of buyers think EPC ratings are more important now than they were a year ago. Also a study by estate agent Hamptons found properties with an EPC rating of between A and C are increasingly popular with those buying properties to rent out. It found that so far in 2022 half of all properties bought by landlords were rated EPC band A to C, up from 39 per cent in 2021 and 33 per cent in 2020.
What does this mean for homeowners?
With gas and electricity prices set to rise again later this year and the cost of living crisis hitting households, it’s no wonder recent studies have shown homebuyers more interested in more energy efficient homes with lower energy bills.
The Minimum Energy Performance of Buildings Bill has an impact on homeowners too. As we’ve previously reported, the government wants all homes to achieve at least an EPC band C by 2035 ‘where practical, cost-effective and affordable’. And to help it achieve its aim the government wants all mortgage lenders to have an average EPC rating C by 2030 across their portfolios.
The average rating for all homes in England and Wales is D however for the millions of houses built before 1900 the average EPC rating is just E.
To find out more about making energy efficiency improvements read our guide How to make your home more energy efficient.
How much does an EPC cost?
How to make your home more energy efficient
How to remortgage
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