Buy To Lets with poor EPCs falling out of favour fast - new study

A new survey gives an indication of how quickly properties with poor Energy performance Certificates are falling out of favour in the private rental sector.

A quarter of landlords say they are likely to avoid buying properties with a low EPC rating in the future, as proposed government changes to the Minimum Energy Efficiency Standard impact buying preferences.

Research amounts 1,000 landlords by the Shawbrook Bank shows that nearly a third of buy to let investors say they would buy a property that already has a C rating or above, and a further 24 per cent said they were more likely to ‘prioritise’ a property with the potential to reach C or above.

Some 15 per cent say they will only buy properties built in the last 20 years - coinciding with separate data showing that houses built before 1940 are unlikely to have an EPC rating of C or above.

In 2020 the government proposed changes to the Minimum Energy Efficiency Standard, stating that landlords may need to reach an EPC rating of C or above by 2025 for all newly rented properties, and 2028 for all rental properties. 

One of the challenges faced with these proposals is that a significant portion of housing stock across the UK was built before 1940 and is therefore unlikely to be C-rated or above.

On average, landlords estimate making the necessary improvements will cost them £5,900 on average.

Pressure is also on landlords from their tenants to consider energy efficiency. 

More than a quarter of landlords surveyed say they have already had tenants complain at least once about a property’s EPC rating, and 16 per cent have received multiple complaints.

Landlords are, however, more likely to make changes to property if their tenants ask. Nearly two-thirds of landlords say they would be more likely to make updates to their property if tenants requested it.

Shawbrook’s Emma Cox says: “It’s concerning to think that a significant proportion of properties, within the Private Rental Sector, could fall out of favour due to poor EPC ratings and significant improvements needing to be made in a short period of time. The market has a responsibility to offer landlords more guidance on what the proposed legislation will mean for them, where to start with improvements, and how to sustainably finance the works.

“Proactive landlords, already making changes ahead of the proposed deadline, will be in a strong position for the future, constantly one step ahead of the upcoming changes. 

“While our research showing that most landlords are set to commence improvement works within the coming 14 months, making changes sooner rather than later will limit the risk of supply and labour shortages for landlords as we edge closer to the proposed 2025 deadline.  

Shawbrook recently launched an Energy Efficiency Discount for new BTL customers where the property’s EPC is A, B or C.