13:41 PM, 17th March 2023, About 6 days ago 35
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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11:25 AM, 18th March 2023, About 5 days ago
In the BPF's budget analysis they highlighted the lack of direct mention of the housing sector, despite the constraints in both the ownership and rental markets.
They also highlighted
VAT relief for energy saving materials:
The Government has published a call for evidence on options to reform the VAT relief for the installation of energy saving materials in the UK. Saying "We welcome this, but the call for evidence doesn’t address situations where energy efficiency improvements are made as part of a wider programme of work and we continue to call on Government to zero rate VAT on all repairs and maintenance work in residential buildings."
11:27 AM, 18th March 2023, About 5 days ago
Government is achieving its real goal of driving the private landlord out and forcing investors to park their savings in the stock market or banks which offer returns below inflation. It is a way of parting middle class punters to hand over their savings for the state to misspend on cockamamie schemes and benefits to friends of political parties getting hugely profitable contracts during events like Covid.
The private rented sector will be the exclusive preserve of companies who will rake it in by charging tenants the maximum the market will bear. My buy to lets are all rented out at a quarter below the market though I do manage them myself. My response time for any issues is 24 hours and resolution within days or sooner for anything serious or weeks for non urgent white goods replacement.
11:46 AM, 18th March 2023, About 5 days ago
These are the current qualifying energy saving measures (ESMs)
The list of qualifying ESMs benefiting from the zero rate is as follows:
Controls for central heating and hot water systems
Ground source heat pumps
Air source heat pumps
Micro combined heat and power units
The consultation mentions the possibility of including battery storage and asks for suggestions of other technologies.
It is a shame that the current list does not include the most obvious omissions for those following the governments fabric first approach, namely
- double glazing
- thermally efficient external doors
- mechanical heat recovery and ventilation
12:11 PM, 18th March 2023, About 5 days ago
Reply to the comment left by Rupert Chapman at 18/03/2023 - 10:17We are constantly told that the EPC assessors are bound by the software that they have to use and are allowed virtually no discretion. If this is true there should be nothing to fear from a new assessment.
I struggle to see how the tenant could influence the outcome one way or the other.
12:29 PM, 18th March 2023, About 5 days ago
Reply to the comment left by Seething Landlord at 18/03/2023 - 12:11..that may be true BUT as I understand it assessors assume the worst case if the can't visually verify a measure. e.g. if you've got underfloor insulation which is not immediately apparent then the assessor will assume none but producing an invoice (that a tenant wouldn't have) showing that it had been done would then tick the appropriate box.
So it could be that a tenants commissioned EPC could be worst!
13:49 PM, 18th March 2023, About 5 days ago
Reply to the comment left by Gromit at 18/03/2023 - 12:29
Others have commented that even if you can produce an invoice the assessor will not accept this as evidence of the installation. We have a similar problem in a property where there has been underfloor insulation since the house was built but because the building regulations at the time did not require it the only way of proving its existence would be to take up the floor. We therefore have an EPC recommending spending £5,000 on installing insulation that is already there, which would add I think 2 or 3 points to the score and save the tenant a few pennies a year.
As others have said, the system is broken and should be consigned to the rubbish bin. It's not even fit for recycling, it is fundamentally flawed and was never designed for its current purpose.
13:02 PM, 19th March 2023, About 4 days ago
Reply to the comment left by Seething Landlord at 17/03/2023 - 15:13
I agree! Please please can the experts who understand how different energy sources work both positively and negatively, make some simple rules for Landlords like me to work with(who do not understand the calculations) and I will try and conform to the new achievable guidelines. Whatever is required will have to give landlords time to, 1 get a new EPC based on the new rules and measurements and then challenge these certificates. So we know where the starting line is. 2 get quotations for the work. 3 find a professional to carry out required work.4 possibly give notice to tenant to find alternative accommodation whilst say insulation is being installed inside property. Which I guess will be expensive and difficult. 5 arrange the funding and possibly obtain a grant
6 get clear guidance as to what costs can be offset against rental income so landlords are reimbursed quickly or if a loan is required for the the work to be paid for, time to obtain a bank loan. Will landlords have to consider Section 24 rules. 7 will some costs not be recoverable until property sold as the required work is considered ‘improvements’ and then only offset able against CGT!
I just hope ALL THESE THOUGHTS if relevant, are properly thought through from the tenants and landlord’s points of interest, or else I fear even more small private landlords will leave the PRS, sell up or possibly move to a different property structure.
13:10 PM, 19th March 2023, About 4 days ago
Reply to the comment left by Happy Landlord at 17/03/2023 - 15:51
I am not against the idea of EPC’s as long as they are correct and not ambiguous, I know many of mine seem to be.
Energy saving I believe is important, especially in older properties.but to carry out the correct improvements on a property by property basis, I want to be given the correct information.
I hate waste!
13:17 PM, 19th March 2023, About 4 days ago
Reply to the comment left by Gromit at 17/03/2023 - 16:01
I am not sure I follow all your thinking, but what as a group ( or combinations of associations and agents etc) can we do to move forwards or bring the chat re changes to EPC to an end?
13:22 PM, 19th March 2023, About 4 days ago
Reply to the comment left by Rod at 18/03/2023 - 11:46
And I am sure the list of missing options is longer . I heard about infra red heating but know nothing about the pros and cons of it