Landlords in England and Wales could be facing a bill of £17.9 billion
to ensure that their rental properties meet a minimum energy
performance certificate (EPC) rating of C by 2025.
While the government has yet to confirm the 2025 deadline for tenancies, or
the 2028 deadline for all tenancies, the prospect of having to shell out up
to £10,000 on a rental property is leading to many landlords to quit the
sector.
And now, real estate firm
Knight Frank
has worked out the total bill for upgrading properties to meet a C rating
and it is £17.9 billion.
30% of tenants say they are willing to pay a premium.
The firm also says that around 30% of tenants say they are willing to pay a
premium for renting a low carbon property.
However, Knight Frank also highlights that the average annual rent being
paid in 40% of local authority areas would not meet the average landlord’s
bill of £9,260 to improve the property to an EPC C rating.
The legislation for improving energy efficiency standards is still at the
consultation stage but should the government decide on the 2025 deadline
for new tenancies to meet the EPC rating, then the firm warns that the
private rented sector (PRS) will face a range of issues in meeting the
deadline.
That’s because it has calculated that around 60% of the 4.8 million
households in the PRS have an EPC rating of C or D.
And there are 2.4% of homes with a rating of F or G, which is below the
current legal minimum rating for rented homes.
Exempt from meeting the current EPC legislation.
However, some properties are exempt from meeting the current EPC
legislation, including listed homes and those properties where the cheapest
improvement bill would be more than £3,500.
Knight Frank also warns that the cap on a landlord’s bill could rise to
£10,000 when the legislation is finally unveiled.
The firm says that it has looked at how much landlords will have to spend
on boosting an EPC rating and found that the average cost to go from a D to
a C is £5,500.
Landlords are facing a bill of more than £10,000.
When the property is in bands F and G, however, the real estate firm says
that landlords are facing a bill of more than £10,000 to reach a band C
rating.
The largest bills will be faced by landlords in London who are facing an
outlay of £3.2 billion because around a fifth of PRS households are found
in the capital.
Knight Frank warns that when the legislation is passed, landlords will
struggle since they are already facing extra cost pressures which come on
top of rising mortgage costs, the erosion of capital gains tax allowances
and changes to mortgage interest relief.
That may lead to some landlords looking to leave the PRS entirely or
rationalising their portfolio.
‘Most landlords are unaware of what’s coming’.
Knight Frank’s Flora Harley said: “Despite the potential impact, most
landlords are unaware of what’s coming.
“A survey conducted in summer 2022 found that 57% of landlords were either
unaware or unsure about the proposed changes, according to the NRLA.”
She added: “Whilst there is no exact clarity on what regulation will be
coming for landlords, or indeed when, there seems to be only one direction
and urgency for action.
“Not only was this highlighted by the IPCC in March, but the National
Infrastructure Commission also recommended a tightening of standards in the
private rental sector only serving to strengthen the likelihood and pace of
implementation.”
‘Lack of a confirmed deadline is causing confusion’.
Simon Thompson, the managing director of Accommodation for Students said:
“The lack of a confirmed deadline is causing confusion in the PRS, and
landlords need to keep abreast of any decision that is made because they
will have no choice but to comply if they aren’t exempt.
“This also means that they will have to spend up to £10,000, which is what
the Telegraph has predicted will happen, and for many that will mean not
making a profit and for others, it will mean leaving the private rented
sector.”
Half of tenants will leave if rents go up.
A new survey has revealed that 50% of tenants will move out of their rented
home if the landlord increases the rent.
The
findings from Uswitch
also found that one in three tenants would be happy to renew their tenancy
– but only if they have a positive relationship with their landlord.
Those most likely to renew their tenancy are aged over 55 with 44% happy to
sign on the dotted line, and 68% of tenants say that communication is a key
component for a landlord-tenant relationship.
When asked the same question, 51% of landlords said communication is key.
The findings also highlight that with rented home demand around 10% higher
than it was in March 2022, tenants will face a dilemma on whether to move
home in the hope of a cheaper rent or staying put with a higher rent.
