EPC ratings drive rental values as industry body urges realistic targets

Energy-efficient properties are attracting rental premiums, as an industry body warns that EPC targets need to remain realistic.

Data from the Mortgage Works reveals that an EPC rating is a core driver of a property value.

Propertymark warns EPC targets must be backed by proper funding as all private rented properties will need to meet EPC C targets by 2030.

More than half of PRS homes rated A-C

According to the data, more than half of private rented properties (51%) are rated A-C , up from 25% ten years ago.

The lender explains that part of the improvement is due to newly built properties, which tend to have a much higher energy efficiency rating (around 97% are rated C or above).

The data also reveals the North of England now sees the highest rental premium, with an A or B-rated property commanding a 13.3% higher monthly rent.

An A or B rated property currently attracts an 8.1% rental premium compared to a similar D rated property, up from 7% in 2024.

Targets must be realistic

Megan Eighteen, President of ARLA Propertymark (Association of Residential Letting Agents), says more support is needed to help landlords with the cost of EPC targets.

She said: “Nationwide Building Society’s latest report highlights both the progress made and the ongoing challenge of improving energy efficiency across the private rented sector.

“It’s encouraging that more than half of privately rented homes are now rated EPC A-C, which can help tenants benefit from warmer homes and lower energy bills. However, much of this progress has come from newer properties, with the biggest challenge now focused on older homes that are more complex and costly to upgrade.

“The stronger gains seen in the North reflect lower property values and more room for improvement, making it easier for some landlords to invest. But this varies across the country, and in many cases upfront costs remain a significant barrier.

“We support the ambition to raise standards, but targets must be realistic and backed by proper funding and clear guidance. Without this, there is a real risk that landlords will scale back investment or exit the market. Over time, that could reduce the number of homes available to rent, which may put further pressure on affordability for tenants.”

According to The Mortgage Works, the average costs to improve older properties, particularly those built before 1919, remain significantly higher, with the average cost to upgrade a pre-1919 property to band C around £10,700 (based on 2024 costs).

Properties built more recently tend to be more energy efficient, meaning fewer improvements are required to bring them up to C standard, with the average cost to upgrade a property constructed between 2003 and 2013, currently rated D–G, to C standard at around £2,500.