cost of living

Cost of living crisis sparks energy efficiency overhaul in PRS

The climbing cost of living, which is affecting many parts of the world including the UK, is proving to be a catalyst for landlords focusing on the energy efficiency of their rental properties.

Energy efficient homes, which can be measured by their energy performance certificates (EPCs), are proving more sought after than ever as people try and offset the impact of soaring energy bills and the rising cost of living. And it isn’t just homeowners but tenants, too, who are becoming more selective about where they live.

A report from Shawbrook Bank has found that as many as 58% of renters would be put off by a property that achieved an EPC rating of D or below in the current climate. The lower a building’s EPC score, generally, the higher the energy bills, so this is a huge priority for many through the country’s cost of living crisis.

As a result, says Shawbrook, landlords in the private rented sector (PRS) are taking notice. In fact, more than half (54%) of landlords have taken action to improve the energy efficiency credentials of their rental homes in the past six months as a result of tenant demand.

While energy bills ramping up is far from an ideal situation, one positive for the PRS is that it is improving standards in the sector for many. As tenants increasingly turn away from older, inefficient properties in favour of newer, better quality ones, this improvement in standards will continue.

Knowledge gap remains for landlords

At the moment, all homes in the PRS must score E or above in their EPCs in order to be legally rented out. For properties that don’t meet this standard, exemption criteria must be met, including the landlord having spent a certain amount of money upgrading the property.

But even for those that can be rented out, the research shows that tenants are less likely to want to take them, particularly through the cost of living crisis. What’s more, there is a review underway that many expect could see the minimum EPC score being raised to C from 2025 for new tenancies, and from 2028 for existing tenancies.

According to Shawbrook, there is a knowledge gap when it comes to landlords being up to date with what’s happening. While 78% of landlords had heard of the proposals to up the minimum EPC, more than a third said their knowledge was ‘limited’ about the changes.

Meanwhile, around three quarters of brokers revealed they were concerned that their buy-to-let clients did not have adequate knowledge of the proposals. For landlords to continue to not only succeed but to remain compliant in the sector, it is crucial to stay ahead of any possible changes in this arena.

Landlords can safeguard against rising cost of living

Emma Cox, managing director of real estate at Shawbrook, said: “Whatever happens with the government’s proposals, it’s clear that landlords need to be thinking about making energy efficiency improvements to safeguard their rental properties.

“As well as the need for clarity from policymakers, the industry has a significant role to play in supporting landlords. Only by working together can the industry play its part in safeguarding the future of the private rented sector.”

She added: “We’re committed to building on the findings of this research – and the conversation around it – to developing new solutions to drive the sector forward.”

While retrofitting existing properties is one way that landlords can – and may need to – ensure their rental homes are up to scratch, investing in newer, more energy efficient homes in the first place is another way to ensure homes remain compliant if or when the new rules come in. Not only that, but it can increase the appeal for tenants looking to lower their overall cost of living through cheaper energy bills.

A separate survey from Shawbrook Bank earlier this year showed that a quarter (24%) of landlords said they are likely to avoid buying property with a low EPC rating, while 30% plan to invest in property that’s already rated C or above.

Shawbrook is also one of a number of banks that offers ‘green mortgages‘. Depending on the product, these can apply to homeowners or landlords and can offer an incentive to reward customers when they achieve higher energy efficiency ratings on their properties.

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