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13:41 PM, 17th March 2023, About A year ago 36
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This Property118 investigation looks at how much energy performance certificates (EPCs) could cost the PRS and whether EPCs save tenants money or whether they are simply a green tax.
A recent report by The Times revealed the staggering inaccuracy of the certificates used to rate the energy efficiency of homes.
It highlighted research conducted by technology company CarbonLaces that shows EPCs overestimate energy use by an astonishing 344%.
The study found the lower EPC rating, the bigger the overestimation. For properties with the worst rating of G, the EPC estimates these properties use 656kWh/m2/yr. Yet their smart meters show they use only 151kWh/m2/ per year – a 344% gap.
The study compared the EPCs of more than 17,000 homes with their actual use, as logged by smart meters.
The research revealed that the average metered gas and electricity use for all properties was 125kwh per square metre a year – 91% lower than indicated by EPCs.
Though the plans have not been made into law, ministers have previously proposed that by April 2025, newly rented properties in England and Wales will need to meet a minimum EPC standard of C – tougher than the current E standard. The regulation is also slated to apply to existing tenancies from 2028.
Findings from Foundation Homes Loans revealed 66% of landlords said they were aware and understood the plans, 25% said they did not understand the details, and 9% were not aware at all.
A consultation on new EPC and minimum energy efficiency standards (MEES) requirements ended two years ago.
The government has given no response to it, leading to widespread uncertainty in the PRS about what is expected from landlords.
Rodney Townson, from landlord association group iHowz has been writing to ministers since 2021 urging them to publish the new EPC and MEES requirements for the PRS.
He warns there is a danger for landlords making improvements to their property to meet current EPC standards, only to find the work won’t meet the new EPC standards when they are finally published.
He said: “Taking out electric heating to replace with gas is good for the current EPC mechanism (gas is cheaper to run than electric), but almost certainly will be wrong for the new EPC (gas produces more carbon than electric).
“As a result, many landlords are reluctant to carry out anything beyond draft proofing and window/door replacement.”
Since 2008, all rental properties in England and Wales have required an EPC. The certificate gives detailed information about the property’s energy efficiency and carbon emissions.
To receive an EPC, you must have an Energy Assessment Survey carried out at your property which costs £70.
The areas the inspector will assess include:
Based on data from lender Octane Capital, an estimated 1.6 million of England’s 4.9 million PRS homes are C or above. This means that 3.4 million homes are below C and need to be upgraded.
Calculations from mortgage broker Habito on the cost of upgrading homes from D to C are roughly as follows:
Averaged out, this puts the cost of an upgrade at roughly £7,466. Multiplying this by 3.4 million homes and there is a total cost across England of an eye-watering £25 billion.
What’s more, this is only a conservative figure, as it is based on merely an upgrade from D to C, leaving out the E to G properties.
A cross-party group of MPs and peers has suggested that landlords who don’t upgrade their properties should be liable for mortgage penalties.
The All-Party Group on a Green New Deal believes there should be a 1% mortgage interest rate premium levied on all buy-to-let properties with an EPC below C which would be fully refundable if the standard were reached within three years.
Mr Townson of iHowz said of the proposals by the all-party group: “The government is still to publish the requirements of the new EPC, and of the new MEES.
“We cannot accept landlords being penalised for not meeting their proposed energy saving requirements until the government confirms their requirements for landlords.”
Under current government regulations, landlords are not expected to spend more than £3,500 on upgrades to meet the current EPC requirements for a rating of E.
However, proposed changes could see all rental properties requiring an EPC rating of C by 2028, and a potential increase of this cap to £10,000, meaning landlords could be required to spend more just to meet minimum requirements.
Landlords and agents have called on the government to provide more financial support for the PRS to meet EPC targets.
In 2022, Propertymark wrote to the Department for Business, Energy and Industrial Strategy calling for a package of financial and taxation incentives to support landlords to get their properties up to EPC targets.
Some of the incentives included:
In the written submission, the industry body said: “Our primary concern is that many landlords will exit the sector with the supply of PRS housing being further constricted and housing options for predominately the most vulnerable being reduced.
“The cost of up to £10,000 will be challenging for all types of landlords especially those with small portfolios and those landlords with properties with low house price values.”
Mick Roberts, a landlord from Nottingham, told Property118: “Many landlords have spent thousands of pounds upgrading homes and we don’t even know what’s what yet due to the uncertainty around the new EPC targets.”
He said a lot of properties may need £30,000 spending on them just to get to band C.
“I’ve got to start telling tenants soon, ‘You can’t live here past 2028, the government say you can’t if the property is not a C, and your rent doesn’t pay for a C’.”
Matt Copeland, head of policy at National Energy Action, said: “There has never been a more important time to upgrade the energy efficiency of our housing stock.
“It is crucial that private renters, who are more likely to be in the deepest fuel poverty, aren’t left behind.”
The campaign group would like tax exemptions to help landlords make the required adjustments to their properties to help meet EPC standards.
Mr Copeland added: “While tighter minimum standards and larger cost caps need to be part of this, it’s important that these come with complementary measures such as tax exemptions and interest free loans to help a landlord make the required adjustments.”
It’s not just landlords who are struggling with EPCs, many tenants are also facing the burden.
In a report from BBC’s East Midlands Today, an 80-year-old disabled woman is being evicted from her home of 62 years due to her property not passing new EPC standards.
Thoresby Estate ,which owns Anne Marsh’s property in Nottinghamshire, said it is no longer viable to rent out and has given her two months to move out.
Anne told the programme: “I’ve been here 62 years, why do I want to go anywhere else?”
A spokesman for Thoresby Estate told the programme it deeply regretted the situation, but new energy performance certificate rules make it no longer viable to rent out houses like Anne’s.
In reality, while EPCs may look good on paper, the entire system seems to be broken, with a big disconnect between grades and a property’s actual energy requirements.
Landlords across the country will face having to pay thousands of pounds just to upgrade their properties and many will be left questioning whether it is worth it. And the big worry for tenants is that many of those landlords will not think it is worth the outlay and leave the PRS – and the tenant having to find somewhere else to live.
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Reluctant Landlord
16:34 PM, 17th March 2023, About A year ago
The other thing I will look to apply for exemption is a lack of consent by the tenant for works. If its made clear that the works will ultimately mean a rent increase then I'm sure my tenants will have their pens ready...
Some measures may actually mean your building insurance goes up as a result - so you could argue that as another third party has deemed the work an added 'risk', and as a result this was 'subject to a condition that the landlord was not reasonably able to comply with'.
. ‘Consent’ Exemption
Third party consent exemption (Regulation 31(1) and Regulation 36(2)).
Applies to domestic and non-domestic property.
Depending on circumstances, certain energy efficiency improvements may legally require third party consent before they can be installed in a property. Such improvements may include (but are not limited to) external wall insulation or solar panels which can require local authority planning consent, consent from mortgage lenders, or other third parties. Consent from a superior landlord may be required where the landlord is themself a tenant. Consent may also be required from the current tenant of the property or other tenants depending on the provisions of the tenancy or tenancies.
It is not practical to provide an exhaustive list of all situations where third party consent requirements may apply. Information on when and where consent is required will be contained within relevant documentation, for example in the landlord’s lease or mortgage conditions.
Information Required: when registering an exemption of this type the landlord will need to upload to the register, a copy of any correspondence and/or relevant documentation demonstrating that consent for a relevant energy efficiency measure was required and sought, and that this consent was refused, or was granted subject to a condition that the landlord was not reasonably able to comply with.
Once registered, the exemption will generally last 5 years; after this time it will expire and the landlord must try again to improve the property’s EPC rating to meet the minimum level of energy efficiency. If this cannot be achieved then a further exemption may be registered. Please note however that, where improvements cannot be made because consent could not be obtained from the current tenant of the property, the exemption will only remain valid for as long as that tenant remains the tenant. The improvement would then need to be made before the property is let on a new tenancy.
Paul Essex
17:28 PM, 17th March 2023, About A year ago
The elephant in the room is that tenants are unlikely to benefit from any improvements.
All costs will be paid for from rents as we cannot spend a five figure sum without increasing the rents. Oddly this is never considered by those clamouring for these improvements.
Ian Narbeth
18:39 PM, 17th March 2023, About A year ago
The Government's proposals have been trailed. If they are enacted not one new house will be made available as a result of the rules but many will be taken out of the market, exacerbating the supply problem for tenants.
The proposals are crass. Landlords will have to spend £10,000 trying to upgrade whether the property is in Mayfair or Middlesbrough. They will have to spend it even if the work is futile - i.e. it is not possible to get to a C rating. They can apply for an exemption from the Council. The exemption will last 5 years and landlords have to spend another £10,000 (or whatever sum the Minister decides) in yet another attempt to raise the rating. If they let a property without a C rating or an exemption landlords can be fined tens of thousands of pounds.
Problems which the Government has not anticipated:
1. There will be a massive demand to get work done, the price of materials will increase and builders will (a) put up their prices and (b) not be able to start for months and possibly not before D Day.
2. Some works will create other problems. Eliminating drafts may lead to mould if the house is not ventilated.
3. Dodgy "solutions" will be offered such as spraying inside the roof which may make properties unmortgageable.
4. Councils do not have the manpower to deal with housing issues at the moment. The are unlikely to prioritise reviewing applications for EPC exemptions.
5. That will mean landlords who can see they will get to D Day without the requisite rating have to decide between evicting the tenant and selling or letting and hoping they will be granted an exemption.
6, If tenants refuse access for works I am willing to give a gold-plated, copper-bottomed, cast iron guarantee that there will not be the mildest penalty. A fine of one penny for misbehaving tenants will be considered too harsh by Government.
7. If a landlord has not even started work - see 1(b) above, Councils may refuse to give exemption.
8.Some upgrading works can only be done when the property is vacant and the furniture and carpets removed. Where is the temporary accommodation for tenants who are displaced?
9 When s21 has been abolished, how are landlords to get tenants out to carry out works or to sell a house that cannot be upgraded but for which an exemption is refused?
10. If 9 applies and the landlord continues to let the property, will he be fined repeatedly?
11. Many landlords do not trust their council to act fairly. The line of least resistance will be to evict the tenant.
12 Rents will go up (a) to cover the cost of works and (b) because there will be fewer houses available..
The proposals if enacted are a disaster waiting to happen.
Mick Roberts
18:46 PM, 17th March 2023, About A year ago
Reply to the comment left by Ian Narbeth at 17/03/2023 - 18:39
Great words Ian.
Everyone should copy them and send Govt and MP's. Not that they listen, like.
Gromit
18:51 PM, 17th March 2023, About A year ago
Reply to the comment left by Ian Narbeth at 17/03/2023 - 18:39
Yup! That's the WEF Plan!
Kalit Sen
21:04 PM, 17th March 2023, About A year ago
Reply to the comment left by Seething Landlord at 17/03/2023 - 15:13
Judging by the vastly costly fiasco over smart meters, the revised EPC ratings and implementation will turn out to be another expensive exercise of little benefit. But that’s how government operated and beleaguered landlords will end up picking up the tab!
Reluctant Landlord
21:20 PM, 17th March 2023, About A year ago
AGREE! the way I see it according to your points
1. There will be a massive demand to get work done, the price of materials will increase and builders will (a) put up their prices and (b) not be able to start for months and possibly not before D Day.. (a)This could be beneficial as if over the £10k proposal then you can apply for exemption. (b) a booking date would be sufficient to 'evidence' you have complied.
2. Some works will create other problems. Eliminating drafts may lead to mould if the house is not ventilated. It may be cheaper to employ one of the 'professionals' that the gvt say you can get a report off to list these issues and then reason why X works cannot be undertaken
3. Dodgy "solutions" will be offered such as spraying inside the roof which may make properties unmortgageable. Then that is unreasonable and a letter from your mortgage provider will be evidence to submit for exemption.
4. Councils do not have the manpower to deal with housing issues at the moment. The are unlikely to prioritise reviewing applications for EPC .
exemptions. The current exemptions detail onthe gov website states 'All exemptions apply from the point you register them.' That means when you hit the button to send it off.
5. That will mean landlords who can see they will get to D Day without the requisite rating have to decide between evicting the tenant and selling or letting and hoping they will be granted an exemption.
6, If tenants refuse access for works I am willing to give a gold-plated, copper-bottomed, cast iron guarantee that there will not be the mildest penalty. A fine of one penny for misbehaving tenants will be considered too harsh by Government. If this happens you are already at the point where have booked in the work so you have fulfilled your obligation. I can't see how a council can (they may try) to prosecute a LL when this is clearly a tenant access refusal. By law you cant get in do do a gas check if the tenant refuses and that has far more serious implications.
7. If a landlord has not even started work - see 1(b) above, Councils may refuse to give exemption. The government site states 'All exemptions apply from the point you register them'. I take that to mean whatever you put in to evidence an exemption, the exemption itself is given there and then by default of registering. It does NOT say a response or reason or refusal is necessary to deem an exemption given. I take this to mean that any exemption is VALID until such time as the Council say it isn't. The they will have to give reason as to why this has not been accepted and therein detail of what that means next.
8.Some upgrading works can only be done when the property is vacant and the furniture and carpets removed. Where is the temporary accommodation for tenants who are displaced? None - if the tenant has not refused such works then they have accepted that there is an inconvience that they have agreed to take on. If the level of work has been explained to them and it involves moving out then they must agree to this as part of the plan. If they dont, then you can use this as an exemption as not receiving tenant permission,
9 When s21 has been abolished, how are landlords to get tenants out to carry out works or to sell a house that cannot be upgraded but for which an exemption is refused? If cannot be upgraded then fill in an exemption. If it comes back that an exemption is refused then I would be issuing a S8 if the S21 is abolished.
10. If 9 applies and the landlord continues to let the property, will he be fined repeatedly? The S8 requires a reason for eviction. You would put in that exemption refused and so this is the only legal route left. You cannot be accused of continuing to let the property if you get an exemption refused as by default the AST was entered into before the exemption was registered.
11. Many landlords do not trust their council to act fairly. The line of least resistance will be to evict the tenant. Yes and the tenant can kick off to the Council and their MP about it!
12 Rents will go up (a) to cover the cost of works and (b) because there will be fewer houses available.. YES AND YES. A failed policy that will hurt more than it will ever help.
Rupert Chapman
10:17 AM, 18th March 2023, About A year ago
One of my members has a tenant that is doing everything to contest a rent increase. There is a tribunal inspection upcoming. The tenant has now ordered a EPC because he doesnt believe the existing one. No doubt he will use his influence to downgrade the current C rating. I cannot find anything in law to prevent the tenant replacing the existing EPC with a new one. It doesnt seem correct that an unauthorised person can influence the EPC register, but I cant see what the landlord can do about it.
Paul Hill
10:27 AM, 18th March 2023, About A year ago
EPC's are a joke. We purchased a 2nd floor flat in 2015 in a purpose built block of flats in Leeds city centre, which has an EPC of D. Other flats around it, identical in EVERY way hav a C rating. As it is electric only it would be necessary to replace the wall heaters with more efficient heaters that can use cheaper overnight electric rates. This will cost thousands and is unnecessary. Our tennant of 3 years tells us the flat is always warm and he has never used the wall heaters! So, we either find someone who will give the flat a C rating or pay thousands to replace the wall heaters that are never used. Our intension is to do neither and to sell the flat. The EPC system is broken and not fit for purpose.
Freda Blogs
10:59 AM, 18th March 2023, About A year ago
Reply to the comment left by Rupert Chapman at 18/03/2023 - 10:17
That is a very worrying prospect, and if it caught on in the vexatious tenant world, could cost landlords /owners very dearly.
It feels as though landlords are the country's punchbags at the moment.