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In order for the UK to reach net zero carbon emissions by 2050, ensuring that all rental properties are as energy-efficient as possible will be key. Above most others, this shift is likely to characterise the real estate industry and the development of new-build properties over the coming decades.
In recent years, discussions about how best to enforce a shift towards energy efficiency in the property industry have caused massive anxiety among landlords. According to now scrapped proposals, the government was set to make the minimum EPC rating for rental properties as high as C, up from the current E rating. In order to meet the deadline, this rule was set to come in as early as 2025.
The short time frame and financial worries regarding these proposed regulations meant that many in the property industry breathed a sigh of relief when the government announced a U-turn on these proposals in September 2023.
However, the government has assured the public that they are still committed to the net zero target, meaning the future of the property industry is likely to still be green, and environmental considerations should still be paramount when making decisions about your property investment.
Moreover, from a financial perspective, there is actually much to be saved and gained for landlords and tenants when energy efficiency is a priority.
Improving your EPC rating will reduce the energy wastage of properties, cutting costs significantly for property owners and bill-paying residents. Keeping in mind the current energy crisis, which was exacerbated by inefficient energy use in UK homes, improving efficiency can only be positive when it comes to making an attractive property for renters with lower running costs for landlords.
In this blog, we’ll aim to answer some of the most common questions surrounding EPC regulations and proposals, such as:
Despite the U-turn regarding the time frame, it’s likely that stricter environmental regulations will still come into effect in the future. One way to avoid costly renovations and potential fines in the future is to act now and improve the energy efficiency of your property. For newer investors looking to enter the buy-to-let market, purchasing new-build or off-plan property is generally a safer option in the long run, as energy-saving features are likely to be part of the investment.
In any case, it’s important to keep up to date with government proposals, find out when new measures are expected to be put in place, and what EPC regulations for landlords really mean for the rental property industry.
So, let’s clear a few things up.
An Energy Performance Certificate (EPC) effectively identifies how energy efficient a property is, as well as the Co2 emissions it produces.
Ranging from A (most efficient) to G (least efficient), an EPC rating is valid for 10 years and landlords can be heavily fined if they fail to get one.
Having an EPC rating is a legal requirement meaning an Energy Assessment Survey must be carried out at every property if an EPC rating has not yet been administered or if a previous rating has expired.
Since April 2018, properties in England and Wales have been required to achieve an EPC rating of E or above, but this may change in the future due to government ambitions towards net zero in 2050.
After a consultation on the matter in December 2020, the government made proposals that will require all rental properties to have an EPC rating of A, B or C in order for them to be legally rented to tenants.
As mentioned, rental properties must currently have an EPC rating of E or above in 2023. These proposed EPC regulations for landlords were a huge source of anxiety in the property industry, as a very short timeframe to make improvements was put forward. A deadline of 2025 for new-build properties and 2028 for those already on the market was proposed.
Many were worried about the significant financial investment that would have been required from landlords who own a property with a sub-standard EPC rating. Those who didn’t take action were set to be hit with massive fines.
In a recent development, however, the government reeled in these proposals and performed a big U-turn on many of their proposed environmental regulations. Rishi Sunak announced in September 2023 that these EPC proposals were scrapped, and the minimum rating will remain at E for the time being.
Regardless, the relatively narrow timeframe that was initially proposed by the government highlights just how important it is for the UK property market to reduce its carbon footprint across the board and future-proof properties. The government still claims to be committed to net zero by 2050, so it is unlikely that this is the last landlords will hear about improving energy efficiency in their properties. For this reason, landlords are still being advised to act now in order to avoid incurring greater costs in the future
When sweeping changes are announced, they are often the source of initial backlash from those most directly affected. In many cases, this comes before the facts and positive impacts of such changes are made clear.
Therefore, considering the context is always important when people are worried about the financial impact of new regulations.
At present, the average UK home produces around 8.1 tonnes of Co2 annually. When you consider all of the UK’s households together, this accounts for approximately 26% of the country’s total Co2 emissions.
According to the Fifth Carbon Budget (released in November 2015) which covers the necessary UK emissions reductions for the period 2023-2028, UK households must reduce their Co2 emissions by at least 3.7 metric tonnes by 2030.
With this in mind, it’s quite clear that despite the proposals being scrapped, it will still be necessary to shift the property industry towards energy efficiency if the UK is to reach its goal of becoming a carbon-neutral country by 2050.
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So, how can you move with the times and adapt to what seems to be an inevitable shift towards energy efficiency in the property industry?
Well, the good news is that there are many ways to improve a property’s energy efficiency, some of which are fairly straightforward.
For investors just entering the rental market and looking to purchase a new-build or off-plan property, this generally won’t be an issue. Almost every such property will be required to meet the current minimum energy efficiency standard upon completion, and many are built with energy efficiency in mind.
The important thing, if you’re new to the private rental sector, is to invest in a property that includes the latest energy-saving or smart-build technologies in order to reduce costs in the long run.
Things to look out for that can actually increase the value of your investment and its attractiveness to eco-conscious tenants are:
With cutting-edge features like these, the energy efficiency rating of a property is unlikely to be an issue, avoiding the unwelcome stress of having to make further investments in the future.
However, for landlords with existing properties, adding features like these can be quite expensive. Although more advanced energy-saving systems like those mentioned above could well become a requirement in the future, there are some more affordable options that should still enable older properties to improve energy efficiency.
Eco-friendly insulation can serve to reduce energy bills for tenants and landlords massively. It’s estimated that around one-third of heat is lost in the average home purely as a result of poor insulation, so ensuring that floor and wall insulation is up to scratch can be an excellent fix. Additionally, there is now a variety of eco-friendly insulation available at present which can further reduce your property’s carbon footprint.
Solar Panels can be initially expensive but serve as a huge saver in the long run, particularly in times of an energy and general cost of living crisis. Effectively harnessing solar energy can make a property more efficient as power can be stored in the event that an area’s electric grid fails, adding further value to the property.
Smart Meters have become something of a norm in homes across the UK in recent years but their value in terms of managing and monitoring energy usage can’t be understated. Although it can be frustrating when you forget to top up the meter, making smaller payments more regularly can be much more financially manageable for tenants and landlords than monthly bills that often seem more expensive than they should be.
As the UK begins to work towards its goal of becoming carbon neutral by 2050, it’s also well worth looking into the grants and financial support that may be available to landlords in terms of improving the energy performance of buildings.
At present, there is a cap on energy performance investments of £3,500, but this could be raised in the future.
With this in mind, landlords should certainly enquire sooner rather than later about any financial assistance that could help them meet the current EPC minimum standard or improve energy efficiency in general.
The EPC proposals for 2025 and 2028 were scrapped, meaning there are no solid government changes to regulations that we can currently use as a guide in the property industry.
On the one hand, this U-turn has been a source of relief for many landlords who were worried about the financial strain and stress of implementing big changes to their properties in a short time. But on the other hand, the government remains committed to net zero in 2050, so it’s likely that there will be changes to regulations in the future. This increased uncertainty about future environmental changes means it can be difficult to make judgements regarding energy efficiency in properties.
From an investor’s perspective, accepting possible future changes to EPC rules as a key part of a successful buy-to-let investment strategy is essential as we move into a more sustainable era of property development.
Achieving a higher band EPC rating may still become a legal requirement in the future. Therefore, taking the relevant steps now will save a huge amount of time and money if you’re hoping to get newly rented properties on the market and start generating a passive income.
So, as an investor, what’s the best way to future-proof your property when it comes to future environmental regulations?
Well, in the long and short term, making a smart investment now in a property that isn’t going to require high-cost updates to meet EPC standards is a pretty foolproof strategy.
In many ways, the most straightforward and cost-effective way to do this is by investing in an off-plan or new-build development located in an area with strong rental yields and a broad tenant base.
Here are a couple of examples of upcoming developments that are ahead of the curve when it comes to energy efficiency and make for high-earning and cost-effective new tenancies.
Currently under construction in Liverpool’s highly popular Knowledge Quarter, this groundbreaking project is part of an ambitious eco-driven brand of developments designed to provide a superior residential experience by harnessing sustainable technologies.
The first in a collection of developments to be located across key UK cities, Liverpool’s Element – The Quarter is set to transform the idea of central city living.
With the overarching goal of all Element properties to be as close to carbon neutrality as possible, the project’s award-winning developers will incorporate a plethora of energy-efficient facilities to ensure the cost-effective and eco-friendly running of each property.
Eco-Features Included:
Due to these innovative eco-aspects, every Element property will have a low service charge, high rental returns and, importantly, be future-proofed when it comes to possible environmental regulation changes.
Located in the heart of one of the UK’s most popular residential districts, Liverpool’s Central Park development will be another incredible addition to the expanding buy to let market of the North West and is sure to attract an abundance of new tenants.
Comprising 174 high-quality apartments and a range of excellent onsite facilities, residents of Central Park will enjoy a premium living experience that prioritises tenant wellbeing.
Importantly, the building will also be powered by a range of eco-features that will again reduce costs for tenants and investors while staying ahead of the curve when it comes to possible future regulations.
Eco-Features Included:
These are just a couple of the developments that symbolise what the buy to let property market will begin to look like over the coming years.
In terms of the new EPC regulations for 2023, residential builds are already starting to incorporate efficient, energy-saving technologies into their plans, highlighting how seriously developers are taking these rules. Although the EPC proposals for 2025 and 2028 were scrapped, the property industry is still shifting towards energy efficiency for a number of reasons.
In short, sustainability simply has to be a key focus of the entire property development industry as the damaging impacts of climate change become increasingly clear and we move towards the goal of net zero by 2050.
For landlords of privately rented properties, having a valid EPC is a legal requirement if they want to continue making a rental income, so now is the time to consider the latest regulations and take the appropriate steps to secure the future of your rental property.
To find out more about our UK investment opportunities and their eco-friendly benefits, get in touch today or browse our latest properties.
Patrick is a property content writer at RWinvest. Keeping a close eye on the UK property market, Patrick helps our readers stay informed and up to date on the latest market news and statistics.
Disclaimer: This guide was updated in September 2023. Depending on when you read, data may be outdated and no longer accurate. Always do your own research to get the latest figures.
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