The government's decision to drop its plan to require all properties in the private rented sector (PRS) to have an Energy Performance Certificate (EPC) rating of at least C has been welcomed by most landlords, a survey reveals.
According to Landbay, 74% of landlords were in favour of the removal of the EPC C target, which they saw as unrealistic and costly for older properties.
Landbay's business development director, Rob Stanton, said: "We applaud the sentiment around trying to improve the energy efficiency of buildings, but we also need to be realistic.
"The UK has a vast amount of older housing that is difficult to retrofit and will be expensive."
He adds: "Over half of rental properties in the UK are D rated or lower so landlords now have some breathing space to plan without a looming deadline."
Intention of landlords to make energy efficiency improvements
However, the lender’s survey also reveals a slight fall in the intention of landlords to make energy efficiency improvements to their properties if they are not legally obliged to do so.
Before the EPC C target was scrapped, 73% of landlords with lower rated properties said they planned to upgrade them to a C rating, with 34% intending to do so sooner and 39% waiting until nearer the deadline.
Now only 62% of landlords said they still intended to upgrade their properties, with 20% doing so as soon as possible and 42% at some point in the future.
Landlords said they would only make energy efficiency changes
The survey also showed that 25% of landlords said they would only make energy efficiency changes if legislation required them to in the future, while 13% said they would not do anything.
The main barrier for landlords to upgrade their properties was the expense and difficulty of retrofitting older buildings.
Some landlords suggested that more government support, such as grants, would encourage them to make energy efficiency improvements.
Also, 26% of landlords were not happy with the government's decision to scrap the EPC C target, as they believed that energy efficient housing was a social and environmental responsibility for landlords.
They would continue to improve the ratings of their properties, regardless of the legal requirements.
Landlord confidence has improved
Landbay's findings have been backed up by a survey from Foundation Home Loans which found that landlord confidence has improved with many landlords reacting positively to the government announcement to scrap the EPC regulations for the PRS.
The survey found that 12% of landlords said the decision would allow them to remain in the PRS - though most said the move would have 'no/very little' impact on their businesses.
Landlords are also seeing an increase in tenant demand properties, Foundation found, and many are seeing an increase in rental yield this year.
The number of landlords who said they were planning to divest some, or all, of their portfolio in the next 12 months has decreased from 37% in Q2 to 28% in Q3.
Although 8% of landlords said would buy more properties over the next 12 months, it is larger portfolio landlords which are more likely to buy.
Also, the proportion of landlords who intend to sell some or all of their properties in the next year has also fallen from 37% in Q2 to 28% in Q3.
'May make the difference in terms of them staying invested'
The director of sales at Foundation Home Loans, Grant Hendry, said: “The Government's announcement on minimum EPC levels not moving up to C and above was perhaps a relief to many, particularly in the short-term, and for a number it may make the difference in terms of them staying invested in the sector.
"The number of landlords saying they plan to divest over the next 12 months has fallen, and this may partly be due to the retraction of the energy efficiency regulations for the PRS, but this should not detract from the need for rental properties to be as energy efficient as possible, particularly in light of the increased utility bills all households have suffered in recent years."
He added: "While it is too early to say whether we are seeing the start of a new trend line, there appear to be many more landlords feeling optimistic about their future within the PRS, and if this means landlords can keep much-needed housing supply available to tenants, then this can only be viewed as a positive."
'The government decision was good news'
News that landlord confidence has improved has been welcomed by Simon Thompson, the managing director of Accommodation for Students, who said: "The government decision was good news for the PRS.
"Lots of landlords were facing huge bills to bring their property up to an EPC rating of C so they can relax now.
"However, there will be lots of landlords who will have spent money to meet the planned energy requirements - but their homes will be better value for tenants."
He added: "I understand too that 26% of landlords say we should improve the energy efficiency of PRS homes and there's an argument for that.
"But we really do need, I believe, either grants or tax relief to be in place for that to happen."
