Nearly nine in 10 property investors are increasing investment in sustainability, with Handelsbanken reporting that 89% are spending more on green improvements across their portfolios.
According to the bank's latest Property Investor Report, an EPC rating of C or above has become the most sought-after sustainability feature among tenants, with 66% of investors citing it as a key requirement. However, confidence that renters are willing to pay a premium for greener homes has fallen significantly since the previous report.
For landlords, this highlights a growing challenge. Energy efficiency upgrades are increasingly seen as essential to protect long-term property value, meet changing regulations and attract tenants. But recovering the full cost of those improvements through higher rents may prove more difficult.
Tenant expectations are shaping investment decisions
The report found that landlords are prioritising upgrades that improve the long-term appeal and resilience of their properties while helping to reduce running costs. Alongside stronger demand for EPC C-rated homes, investors also reported growing interest from tenants in features such as EV charging points, smart home technology and solar panels.
Richard Winder, Head of Sustainability at Handelsbanken, said climate and energy considerations have become a mainstream concern for property investors, reflecting both evolving regulation and rising tenant expectations.
Green upgrades remain important, but returns are less certain
Despite continued demand for more sustainable homes, the report suggests landlords may need to rethink the financial case for retrofit projects. While 68% of investors believe tenants are willing to pay more for greener properties, that's down sharply from 92% in the previous survey.
The findings suggest that although sustainability is becoming a key factor in attracting and retaining tenants, landlords should be cautious about assuming every investment in green improvements will translate into higher rental income.
Landlord Knowledge also released a recent report which backed this up and showed that landlords are drawing £2.37bn of finance for EPC works.
They say this showed “retrofit spending is already turning into a mainstream funding issue. The latest Handelsbanken findings suggest the market case for upgrades remains strong, even if rent uplifts alone do not cover the bill.”
Costs of the requirement
Back in February, when news of the changes to EPC requirements was being discussed heavily in the media, the chief executive of Octane Capital, Jonathan Samuels, said: "While the government has extended the deadline for the private rented sector to reach EPC C, this research shows that the scale of refurbishment required remains substantial, with close to £20bn worth of improvements needed across England alone."
It’s all about timing
With EPC requirements, insurance considerations and the financial impact of extreme weather all becoming increasingly important, landlords may wish to assess the benefits of investing in energy efficiency improvements sooner rather than later. This is particularly relevant for older properties, where delaying upgrades could result in more extensive and costly work in the future.
While industry bodies continue to call for greater access to funding schemes, including extending initiatives such as the Warm Homes programme to private landlords, the availability of financial support remains uncertain. As a result, many landlords will continue to fund sustainability improvements through their own resources or by borrowing while awaiting further clarity on government policy.
Handelsbanken’s report can be seen on the official reports page.
What this means for landlords
The bottom line is that green improvements are increasingly becoming a long-term investment in protecting your property's value and competitiveness. So, you need to:
- Prioritise upgrades that improve EPC ratings and reduce running costs.
- Be realistic about rental returns, as higher rents may not fully offset retrofit costs.
- Expect increasing pressure from lenders, insurers and future EPC requirements.
- Plan funding early to avoid higher costs if regulations tighten.
