Majority of landlords won’t buy a property below EPC C

More than 71% of landlords are unlikely to buy a property which has an EPC rating of less than C, according to new data.

The study by Foundation Home Loans and BVA BDRC, reveals the more properties a landlord has within their portfolio, the less likely they are to buy below a C rating.

A staggering 74% of landlords with six to 10 properties say they would not buy a property with an EPC rating between D-G.

Looming changes to EPC rules

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.

Nearly three-quarters of landlords (71%) said they were fully aware of the looming changes to EPC rules while 24% were aware something is changing and just 4% had no awareness of the rule changes.

Just 18% of landlords polled said they didn’t think EPC rating would be a factor in their buying decisions.

Landlords to fund EPC work using savings

In terms of the work landlords intended to carry out on below level C properties, 37% said they would carry out the works at the minimum cost required to comply, while nearly one in five (20%) said they would carry out works to maximise the long-term value of their property.

However, a quarter said they would not carry out any works and would either sell the property or not re-let it.

Landlords anticipate it will cost just over £10k per property to carry out the works required to reach EPC level C, with this rising to over £11.5k for those with larger portfolio sizes.

According to the survey, more than half of landlords (57%) said they would fund the works via savings, 33% said they would increase the rent and 18% would access government grants or funding.

A further 19% said they would either take a further advance from their lender or take out a loan (down from 20%).

Landlords are thinking seriously about their existing portfolios

Grant Hendry, director of sales at Foundation Home Loans, said: “While we still might be waiting for certainty and clarity over when the government is likely to introduce its minimum EPC level legislation for the private rental sector, it’s clear from this research that landlords are aware of what is likely to be coming.

“Landlords are thinking seriously about their existing portfolios, how they might fund improvements, and what their plans might be when this is introduced.”

Mr Hendry said it’s not suprising that landlords want to buy properties with higher EPC ratings. 

“With landlords anticipating a cost of over £10k per property in order to improve its EPC level to C, it is perhaps not surprising they are disinclined to buy properties already below this. In effect, they are future-proofing their portfolios by opting only to buy C and above properties now, while they will presumably focus on those properties within their portfolio which are not currently at this level.

“It remains somewhat surprising that the majority of landlords are saying they will fund the work via savings, and we wonder whether when push comes to shove, they will really want to do this or they will seek instead to use finance.”