Savvy landlords should keep EPC ratings at the top of their agendas

EPC ratings continue to climb higher on the list of tenant priorities, and landlords are being urged to consider this when making property investments.

Another survey gauging tenants’ opinions on the energy efficiency of properties in the private rented sector has revealed a trend that most savvy landlords are already aware of: that EPC (energy performance certificate) ratings are gaining traction as one of the most important factors in a property.

The majority of people across the country will now be all too aware of the skyrocketing costs involved with heating and powering their homes, as bills have continued to rise over the course of the winter. This is as much the case for renters as it is for homeowners.

In Shawbrook Bank’s latest piece of research, more than half (58%) of private renters revealed that they were “less likely” to consider rental homes with low EPC ratings – rated at a D or below). This could be a big blow to landlords who own energy inefficient properties, but, equally, a huge positive for those who own newer, better kitted out homes.

How important are EPC ratings?

EPC ratings have been talked about a lot in the context of the private rented sector in recent years. With the average home in England currently achieving a D rating, the minimum legal level for a rental home to operate at is currently an E rating.

However, as part of the government’s plans to both improve standards and slash greenhouse gas emissions in the UK, there are proposals currently being considered that are likely to see this be raised to a D or even a C – and this could happen as early as April 2025 for new tenancies.

So prioritising EPC ratings now, particularly when considering new property investments, is being encouraged across the board.

Shawbrook managing director of real estate Emma Cox says: “With an unprecedented energy crisis, the energy efficiency rating of our homes has become increasingly important.   

“However, the research also indicates that we, as an industry still have much to do in terms of educating those in the rental market on this issue. Interestingly young renters are paying closer attention to the energy efficiency of their properties.   

“While we don’t know whether this is driven more by cost or an interest in sustainability, landlords should assume that it’s only going to increase in importance for tenants.    

“Landlords are already making changes to their properties to support their tenants and bring their properties up to the standard that is likely to soon be expected. However, this can be a costly exercise, particularly with the increasing costs of materials and labour.”

Thinking about target tenants

Shawbrook’s research also found differences between tenant types in terms of their opinions on EPC ratings, which could be a further influence for landlords considering making changes to their investments.

Almost three quarters (72%) of 18-34-year-old renters said that they always check EPC ratings on the homes they are looking at before proceeding. However, in the 55-plus age group, only 52% said the same.

While knowledge and awareness around EPC ratings is certainly growing, there is still a knowledge gap in the sector. Only 7% of people believe they know “a lot” about the requirements, while 27% of tenants have heard of them but know nothing about them.

More than a quarter (27%) claimed to have never heard of EPCs, and 56% said they don’t know the rating of their current property.

While many landlords will opt to retrofit their existing properties to bring them up to standard, this can be very costly – and some of the lower rated properties simply will not be able to be brought up to new minimum rating requirements in the future.

As a result, growing numbers of people are looking to invest in new-builds or newly renovated homes that have the highest EPC ratings in the first place, to save themselves the hassle down the line, and make their rental homes more appealing to today’s tenants.

BuyAssociation specialises in new-build property investments, including off-plan opportunities for homebuyers and investors. Get in touch for more information.

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