energy efficiency property new-build property

One in five tenants now prioritise energy efficiency in a new home

Improving the energy efficiency of the whole property market is on the government’s agenda over the coming years, but many homeowners and landlords are already taking action.

Until relatively recently, living in an energy efficient property – whether as a homeowner or a tenant – was generally considered a ‘nice to have’ as opposed to a ‘must have’. Things like proximity to public transport, and even aesthetic features, would have been placed higher up on the priority list.

However, in light of both a significant rise in environmental awareness, as well as the soaring cost of living and energy bills, energy efficiency has arguably been catapulted into the spotlight for many in the property industry. It is already changing behaviours in terms of how people are investing, and what tenants are looking for.

A new report released by Rightmove, titled The Greener Homes Report, has honed in on the issue of energy efficiency and sustainability across the property market, based on its listings. It has found changing attitudes and behaviours among both landlords and tenants in the private rented sector.

The energy efficiency balance

The report found that one in five (19%) of tenants say that potential energy bills and the eco credentials of a property will be a “major factor” when choosing a home. Now more than ever, tenants are checking the energy performance certificate (EPC) of a property as a matter of course.

With this in mind, landlords and property investors are increasingly considering the energy efficiency of their rental properties. In some cases, properties can be retrofitted to achieve a higher EPC rating, while, for others, the best course of action has been to sell older properties and replace them with newer homes.

Rightmove’s analysis reflects this trend, when comparing average EPC ratings across Great Britain’s rental market between 2019 and 2023. In 2019, 70% of rental houses were rated between D and G on their EPCs, with 30% rated A-C. In 2023, this had improved to a 62%/38% split.

Likewise, rental flats have seen improvements in their energy efficiency levels over the past four years. In 2019, 45% of rental flats were rated D-G, with 55% scoring A-C. In 2023, this figure has lifted, with 64% of flats now rated A-C, and 36% scoring D-G.

As we edge closer to the current proposals in the pipeline for rental properties in England and Wales to achieve a C on new tenancies by 2025, and for all tenancies by 2028, it seems likely that these trends towards investing in more energy efficient properties, including new-builds, will continue and even increase.

Portfolio landlords are adapting the most

Awareness of the proposed EPC legislation changes has grown significantly among buy-to-let landlords, according to Rightmove, with 80% of those surveyed saying they are aware of the government’s plans (which have yet to be officially confirmed or finalised in detail). This is up from 65% in 2022.

Increasingly, landlords and property investors are looking at newer, more energy efficient properties. The research found that 61% of landlords would now not buy a rental property rated below a C, compared with 47% who said the same last year.

However, in general, it seems that portfolio landlords who own five or more properties are more keen to adapt to new energy efficiency standards – and perhaps more able to – than smaller landlords. They are also more likely to invest in a property rated below a C, presumably with plans to upgrade it.

But it seems that all landlords are more likely to sell a low EPC property, and possibly replace it with a more eco-friendly one, than to retrofit it to bring it up to standard, with 33% of those who own low-graded rental homes saying they plan to sell them. This is up from 20% last year.

More clarity needed

Theresa Wallace, Chair of the Lettings Industry Council, says: “The lack of clarity around changes to EPC legislation is making it very difficult for landlords to get ahead and make energy efficiency upgrades, and hard for agents to give accurate consultation and advice.

“What landlords want is certainty around what the EPC expectations will be, the investment required to make upgrades and whether any changes they make now will contribute towards any minimum required investment.

“Until then, smaller landlords in particular are having to wait it out, and agents are limited in what they can best recommend to their landlords.

“The energy crisis has made tenants aware of EPCs and the benefits of a more energy efficient home in ways they weren’t previously. Unfortunately, a chronic shortage of available properties to rent means many tenants aren’t able to focus on choosing a home with a better EPC rating, though this could change in the future.”

BuyAssociation connects property investors directly to developers across the UK, with many of our investment opportunities involving top EPC-rated new-builds and newly renovated properties. Get in touch for more information.

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