The quality of properties on offer in the UK rental market is on the rise as landlords seek to get ahead of the market, with upcoming energy efficiency reforms set to have more of an impact.
Properties in the private rented sector are typically “newer, more energy efficient, and of a higher standard overall”, according to new analysis released by Paragon which combines government analysis with in-depth interviews with landlords.
The study shows that although UK rental homes are “historically older”, landlords are actually increasingly targeting newer properties. It notes that as the sector has grown over time, the number of properties built after 1990 that are rented out has increased by 42% over the past 10 years, while those constructed between 1919 and 1944 have only increased by 3% during the same period.
This demonstrates how landlords are increasingly bringing newer homes to the UK rental market, a trend which is likely only set to increase as the government brings in stricter energy efficiency rules and decent homes standards.
Shifting standards in UK rental homes
While reports of unfit rental accommodation still crop up in the media, the overall picture is vastly different today than it was 20 years ago. In fact, since then, there has been a “significant improvement” in standards in the market led by greater buy-to-let investment.
The 2005 English Housing Condition Survey (EHS) found that 41% of privately rented homes were classed as “non-decent”. However, the most recent corresponding report from 2023-2024 found that this has almost halved, to 21%.
The report notes: “Although rising standards of PRS housing stock can largely be attributed to higher quality homes being brought into the sector as it has grown, diluting the proportion of lower quality properties, landlords have also improved existing stock.”
This means that to improve standards in the UK rental market, a combination of investing in newer housing stock along with buying and improving existing properties is needed by landlords, and the report reveals some interesting landlord preferences.
A quarter of landlords surveyed said they prefer to purchase properties with no need for improvement. This could include new-builds, where tenants can simply move in and enjoy greater energy efficiency and cheaper bills, with no need for any renovations for several years from the landlord.
At the same time, 44% of landlords said they preferred to buy homes that needed improvements, which can mean securing the property at a lower price; meanwhile, just less than a third (31%) said they had no preference, so these landlords would invest in either option depending on their circumstances or the property on offer.
On average, landlords reported investing around £8,500 per year on property improvements across their portfolio. This ranges from an average of around £3,500 per year for those with one to three properties, up to £11,800 for those with 11 or more rental homes.
Energy efficiency in rental homes
The number of UK rental homes with energy performance certificate (EPC) ratings of C has surpassed the number of D-rated properties over the past 10 years, according to the English Housing Survey.
In the latest survey, 45.1% of privately rented homes achieved an EPC rating of C in 2023, up from 21.7% back in 2013 – while the proportion of D-rated homes has fallen from 47.4% to 41.5% during the decade.
Those achieving a top A or B rating – of which a large number will be new-build homes – have risen from 1.3% of the market to 3.3%. At the same time, E, F and G ratings in UK rental homes have all decreased. This also coincides with new minimum energy efficiency standards in the PRS that mean all homes must achieve at least an E currently in order to be legally rented out, unless exempt.
Paragon’s survey reveals that 83% of landlords have at least one property that meets the new proposed energy efficiency standards of EPC rating C or higher from 2030. However, 73% still own at least one property rated D-G, ” highlighting the size of the challenge they face.”
Looking to invest in UK rental property with high energy efficiency? Get in touch with BuyAssociation today.
