This is one that’s been bouncing around for quite a few years with no decision made yet. Forcing landlords to upgrade to EPC C is something that is hanging over the heads of landlords and something that I wish the government would make their minds up about!
I first wrote about EPCs back in January 2018, when the Government introduced an ‘E’ grade minimum for residential properties. This was reasonable, and could be met with minimal changes being made.
Following this, in October 2020, I wrote about how the Government u-turned on this and proposed to make all privately rented homes band C for new tenancies from 2025 and existing tenancies from 2028. This included a consultation that was started on 30th September 2020.
It doesn’t stop there! I then wrote about the EPC issue which was causing significant confusion for investors back in February 2022, where a number of outlets were reporting that ‘landlords must upgrade…’, however the matter had not yet passed into law.
Where Are We Now?
Well, around three years on from the original announcement nothing has changed in terms of a decision.
We’ve had the failed green homes grant that has caused landlords to doubt there will be any support for them in making these improvements and question the availability of tradespeople and materials to meet requirements within the timeframe.
There has been a rental crisis largely caused by government legislation and uncertainty (of which, EPC uncertainty has played into) driving down the supply of rental housing and therefore stoking competition between tenants.
Now, we have seen a potential new path in that the Department for Energy Security and Net Zero have proposed to remove the 2025 requirement for existing tenancies and have all rental properties needing to meet the standard by 31 December 2028.
Whilst this may sound positive, it still begs the question as to how landlords are to be expected to cover the £10,000 to £15,000 cost of works to upgrade. Particularly in a climate where returns from property are squeezed.
Ok, so 2028 is better than 2025 but there is still no answer to whether (and when) this will be passed into law, so landlords are still unable to plan. Speaking with landlords I network with, there is a division between those carrying out improvements anyhow and those waiting for proposals to be finalised, so they don’t waste money.
Oh, and there is also a sting in the tail as ministers are considering a punitive scheme to fine landlords up to £30,000 if they fail to upgrade their properties by the extended deadline.
What Should Landlords Do?
This is a very subjective question!
My recommendation is to be proactive and start with an assessment of your portfolio to get an idea of the work (and cost of the work) involved so funds can be set aside.
A word of caution about this, however; make sure the works you complete will have the desired impact as I don’t doubt that we will see headlines where landlords have spent on improvements, but they have not had the desired effect.
In addition, I believe that the £10,000 threshold is not a total for all improvements, but the cost of the next most suitable option so keep an eye out for this.
Once you know what work is involved then the next step is to decide whether to do it now or later. This is the subjective point, but where there are incremental improvements, landlords may choose to make them over a period of time.
Here’s the problem though. Many small portfolio landlords have chosen to put their funds into property to help support them through retirement and with these big costs being demanded, it will undoubtedly cause another landslide of landlords choosing to cash in because the cashflow is not there.
I don’t doubt that these changes will come in eventually, but let’s watch this space for the next step along the path!