Landlords face decades-long wait to recoup EPC upgrade costs

It could take landlords in the private rented sector (PRS) more than two decades to recoup the costs of upgrading their properties to meet the government’s minimum EPC C rating deadline by 2030.

The research from lettings and estate agents, Benham and Reeves, found that the average cost of upgrading a sub-C rated property to a C or above in England is £7,396.

While this improvement is expected to create an annual energy bill saving of £280, it would take the average landlord an astonishing 26.4 years to meet the expected annual cash savings.

However, landlords in the capital face a daunting 31.7 years to recoup their investment.

Initiatives designed to win the vote of the average tenant

Marc von Grundherr, a director of Benham and Reeves, said: “Since taking power, our new government has launched a range of initiatives designed to win the vote of the average tenant without much thought for the wider rental market and plans to make EPC requirements of a C mandatory are yet another example of this.

“Insisting that landlords make such a sizable investment into the energy efficiency of their property for what is, let’s face it, a very marginal improvement, is only likely to act as another deterrent to investors.

“Especially when you consider that it would take almost 27 years to recoup this investment on the money saved on energy bills and the average landlord only remains in the sector for a decade.”

He added: “What’s more, current plans provide no guarantee that carrying out any work will actually improve an EPC score and when you also consider the lack of tradespeople and the high prices they’re commanding as a result.

“It’s no wonder many landlords may think twice about their future within the sector.

“Those who do remain will inevitably have to pass any cost incurred in meeting an EPC C rating onto the tenant in the form of higher rent, further exacerbating the current issue of rental market affordability.”

An average upgrade cost of £7,807

Landlords in London face an average upgrade cost of £7,807 and an expected annual energy bill saving of £247 – and an average payback period of 31.7 years.

Benham and Reeves say this figure is much higher than elsewhere because there are higher average upgrade costs in the capital

Also, the prevalence of Grade II listed buildings, means they tend to have limited potential for energy efficiency improvements.

Other regions with longer-than-average payback periods included the East Midlands (30.8 years), North East (29.8 years) and East of England (27.0 years).

While the South West region offered the highest potential energy bill savings, its relatively high upgrade costs meant that landlords there would still need to wait an average of 22.5 years to recoup their investment.