Cost of EPC improvements exceed landlord pain thresholds

Cost of EPC improvements exceed landlord pain thresholds

1:38 AM, 22nd July 2022, About 3 months ago 7

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There is a gulf between the amount that landlords are willing to pay to meet proposed new EPC requirements and what it is actually likely to cost.

A survey of landlords carried out on behalf of Paragon Bank has found that 77% of landlords are willing to spend up to £3,000 to upgrade each property they own to EPC C in order to meet new regulations proposed by the Government, but 78% of landlords would need to spend over this amount.

Taking into account the Government’s proposed cap of £10,000 per property, the average cost to upgrade each property to EPC C* is £10, 560, according to Paragon’s analysis.

The findings were published in a Paragon report titled, ‘The rental sector energy challenge’, which examines the potential impact on the private rented sector of proposed regulations that, if passed into law, will require all properties let for new tenancies to be rated EPC A-C by 2025, extending to all tenancies by 2028.

The report also includes insight on how buy-to-let property investors would fund the works. Six in 10 said that they would use savings, making it the most popular source of potential finance, followed by just over three quarters (27%) who said that they would increase rent. Almost one in five (19%) would rely on Government funding, just under one in 10 (8%) would utilise a further advance from a mortgage lender or take out loan, and a similar proportion (7%) would release equity from their portfolio.

The proposals may also influence investment in buy-to-let property, with just over two-thirds of landlords (68%) surveyed stating that they are less likely to purchase homes with EPC ratings of ‘D’ or lower in the future as a result of the potential regulations. Just over one in five (21%) said that it would make no difference to their future acquisitions and 4% said that they would be more likely to purchase a property if it was rated below EPC C.

Richard Rowntree, Mortgages Managing Director for Paragon Bank said: “It is encouraging to see that landlords anticipate that future portfolio expansion will target properties rated EPC C or above, bringing more energy efficient properties into the PRS. Paragon is one of a number of lenders to offer favourable rates that provide a financial incentive to this.

“Of course, this is only part of the issue as data shows that a large proportion of current PRS stock is below the standard required by the proposed new regulations.

“The apparent disparity in what it is likely to cost to meet these standards and what landlords are willing to spend helps to illustrate the financial challenge the new regulations would pose to buy-to-let investors.

“There remains a lot of uncertainty around the proposals, so the sector needs some clear guidance from the Government. With this, my hope is that landlords will have a better understanding of how the new regulations would impact them and the resulting financial support they would require.”



Comments

Porky

8:51 AM, 22nd July 2022, About 3 months ago

One of my properties was epc D and I made enquiries to see if a boiler upgrade would push it into band C. It did so I've had fitted a new Baxi 800 boiler condensing combi for £2300 Inc vat and fitting/testing. I timed it at an annual gas check date so got the cert included in that price. The old boiler was a baxi 105e and not that efficient and things were starting to go wrong with it. The new one comes with a 10 year warranty if you use a registered plumber. Ideal.
Note I'm going to put the rent up a bit next year if inflation doesn't get under control.

Jireh Homes

9:27 AM, 22nd July 2022, About 3 months ago

In Scotland the timetable for introduction of MEES and SAP Band C is the same, but we have yet to see the cost cap. With the original plan for introduction of Band E in 2020 the cap was £5000. As legislation delayed although not the timetable Band D was due to be mandated in 2022 with cost cap increased to £10,000. Hoping that when the legislation published the cost cap is not further increased!

andrew sheppard

9:39 AM, 22nd July 2022, About 3 months ago

I will do nothing and will sell if I have to. I have very happy tenants who have lovely homes, typical 2/3 bed terrace type houses. The EPC system does not appear to work and the potential savings v investment is just daft. If this is about CO2 climate etc then the process should start on private householders as this is 80% of housing stock - no votes for MPs if that happened so go after rented and hated landlords. This is just utter rubbish. Its about time that landlords went on strike like the rest of the country and tell these idiots to do one.
To get a terrace up to a C would likely involve insulating walls, riping up floors and insulating etc - are all the tenants moving out for a few months. Unworkable, unpractical and if adopted will bring a housing crisis to a whole new level.

Porky

10:43 AM, 22nd July 2022, About 3 months ago

Reply to the comment left by andrew sheppard at 22/07/2022 - 09:39
I agree. If the property needs serious work like insulating walls and solid floors then the investment would likely never be recouped so sell to a private buyer who will not be constrained by EPC ratings. Take the hit on capital gains and get out of the PRS.
In my case i have two stone built terraced houses that are double glazed with Gas CH and full loft insulation and one was rated as EPC C and the other D. As it happened only a slight improvement in boiler efficiency (apparently) was needed to get from D to C...
Nuts!!

DSR

16:43 PM, 22nd July 2022, About 3 months ago

....and when we all sell up as it cost to much to upgrade then only first time buyers or home occupiers will potenitally buy.
That means less rental stock (presumably the FTB's will be still living at home to have been able to afford the deposit/mortgage in the first place...) AND no enviro benefits either as new buyers have no legal reason to upgrade to a C as they are owner occupiers

Agree - total nuts!

Ian Simpson

10:28 AM, 23rd July 2022, About 3 months ago

Reply to the comment left by andrew sheppard at 22/07/2022 - 09:39
Absolutely right. I am already selling up slowly and surely, but the remaining flats/houses have very happy tenants in situ. I will be doing nothing at all about trying to change EPC ratings. Total waste of time and money. I suspect the whole requirement will be scrapped / delayed in due course anyway, by the new administration of Ms Truss ...!!

Porky

11:08 AM, 23rd July 2022, About 3 months ago

I wouldn't hang on hope of Ms Truss doing anything about planned changes in the PRS on EPC and evictions etc. The tories have all gone soft on the poor tenants and the luvies in left wing organisations like Shelter.

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