Preparing for an EPC policy reversal | Labour government expected to reintroduce a minimum standard for EPC ratings in the private rental sector

Originally published by Best Advice

Steve Cox, our Chief Commercial Officer, discusses the new Labour government and how it plans to reintroduce EPC ratings for UK homes, with a focus on the private rented sector (PRS).

The new Labour government has begun outlining its commitment to improving the energy efficiency of UK homes, with a particular focus on the private rental sector (PRS). This initiative is not just about reducing carbon emissions and tackling climate change, but also about reducing energy bills and improving living conditions for tenants.

For landlords, this means properties with an Energy Performance Certificate (EPC) rating below C are now – once again – likely to need upgrades to meet new regulatory standards which were dropped by the last Conservative government, but are now very likely to be reintroduced.

And although we’re yet to hear what the deadline date might be to secure the EPC improvement, it seems likely to be 2028. We should bear in mind that a majority of PRS properties are currently ‘ranked’ at EPC D or below, so mortgage advisers, especially those working with Fleet Mortgages, can play a crucial role in helping landlords navigate these changes and access the necessary funding to make these improvements.

The Labour Government’s manifesto outlined several key commitments to enhance energy efficiency. These included introducing a new £60 billion Energy Efficiency Fund to help finance the necessary upgrades, and implementing a zero-interest loan scheme for homeowners and landlords to improve energy efficiency. Additionally, the manifesto promised to strengthen the Minimum Energy Efficiency Standards (MEES) regulations, which will involve more rigorous enforcement and higher penalties for non-compliance.

The cost of upgrading properties to meet the new EPC standards will differ greatly, but the government is expected to offer some financial incentives such as grants, subsidies, and low-interest loans. However, these could be very limited in scope and it may well be that many landlords do not qualify for them.

However, a growing number of lenders, including Fleet, are looking at our own incentives and what we can do to promote energy efficiency and ensure the work is carried out.

We, for instance, have a Green Cashback feature, which can significantly benefit landlords looking to improve their properties’ energy efficiency. This offering provides a £1k cashback incentive for properties that achieve an EPC rating of A, B, or Cduring their fixed mortgage term. It is an excellent opportunity for advisers to guide their clients through the process of upgrading their properties and accessing afinancial benefit to put towards the cost of the work.

This focus on EPC levels, energy-efficiency and the like, does present an opportunity for all advisers to engage/re-engage with their landlord clients on a regular basis, especially if you’re aware of their property/ies EPC levels currently being below C. By the way, you can see the EPC for all properties at: https://www.gov.uk/find-energy-certificate

Advisers should work closely with landlords to assess the funding required for necessary upgrades. This involves a thorough review of the current EPC ratings and identifying the most cost-effective improvements.

You can then provide detailed financial planning to ensure landlords understand the investment needed and the potential returns. This can help landlords navigate the various financial incentives available from either government or lenders. By staying informed about the latest policies and offers, advisers can ensure landlords take full advantage of available support.

Advisers should also emphasise the long-term benefits of improving energy efficiency. Upgraded properties not only comply with regulations but also tend to have higher property values and are more attractive to tenants. Energy-efficient properties lead to lower utility bills for tenants, making the properties more attractive and potentially allowing for higher rent. Additionally, landlords can save on maintenance costs as energy-efficient homes tend to be more durable.

Upgrading properties to meet higher energy efficiency standards also contributes to national efforts to reduce carbon emissions, and as energy efficiency becomes a more significant factor for tenants, properties with higher EPC ratings will stand out in the rental market.

The new government’s push for improved energy efficiency in the PRS presents both challenges and opportunities for landlords. Advisers can smooth the path for their landlord clients to ensure they finance any upgrades effectively, plus as always,regular communication with the client base often leads to a fuller understanding of changing wants and needs, which can lead to new business, whether mortgage or otherwise.

Advisers should therefore be using this renewed focus on Green and energy-efficiency within the PRS to engage with clients, educate them, and support any transition to higher standards. It’s an opportunity to be grasped.