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Two thirds of rental homes not energy efficient

Octane Capital Octane Capital
Posted on Mar 23, 2022 | in Press Releases

Two thirds of rental homes not energy efficient

With energy bills due to increase by 54% in April, research from specialist property lending experts, Octane Capital, has revealed that just a third of rental properties currently have an EPC rating of C or above.

An EPC, or Energy Performance Certificate, is a measure of a property’s energy efficiency with those in the higher bands of A to C benefiting from lower energy bills.

While an EPC has been a legal requirement for all homes since 2007, the government has set a target to ensure that all properties within the private rental market have a minimum EPC rating of C or above by 2028.

Part of this includes the Minimum Energy Performance of Buildings (No. 2) Bill, which reached its second reading in the House of Commons last Friday and aims to legally increase the minimum level of energy efficiency to a C.

While this is good news for future tenants, just 33% of current properties in the private rental sector across England and Wales currently boast an EPC rating of C or above. That’s just 1.6m homes out of a total of 5m.

It’s also estimated that the cost of bringing these rental homes up to a C rating sits at a minimum of £7,646 per property, with the total cost of improving PRS energy efficiency hitting £25.7bn.

London is home to the most energy efficient private rental market in England and Wales. 41% of the capital’s rental properties have an EPC rating of C or above, equating to 424,460 homes.

However, the sheer size of the London rental market means that the remaining 59% would also require the largest budget to bring them up to standard - totalling £4.7bn.

The South East (240,573), North West (190,154), South West (179,212) and East of England (174,949) also offer some of the highest volumes of energy efficient rental properties.

At the other end of the table, Wales (62,122), the North East (65,033) and East Midlands (125,039) are home to some of the lowest stock levels of rental homes with a rating of C or higher.

CEO of Octane Capital, Jonathan Samuels, commented:

“It’s currently a legal requirement that rental properties have both an EPC and a minimum rating of E. However, the government’s new aim is to increase this to a C rating by 2028 and around two thirds of current PRS stock sits below this threshold.

This means that many tenants will already be paying considerably higher energy bills than they would in a more energy efficient home and this cost is set to climb significantly higher this year.

While the government has committed to ensuring new rental homes meet a minimum standard, it’s fair to say they shoulder some of the blame where existing rental properties are concerned. The cost to improve a property’s rating to a C is substantial and many landlords simply don’t have the financial resources to do so, having seen the profitability of their portfolio dwindle thanks to legislative changes to tax relief and an increase in stamp duty when purchasing a buy-to-let home.

It’s yet another example of how the government’s campaign against landlords has been inadvertently detrimental to tenants and why we should be encouraging buy-to-let investment in order to raise standards across the sector.”

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