EPC C consultation could cost landlords big

According to the government’s launch statement, this policy would lift half a million households out of fuel poverty and save the average tenant £240 a year.

But it also greatly increases landlords’ financial exposure with energy efficiency upgrades. At the moment, landlords can get an exemption from the minimum EPC of E once they have spent £3,500. In 2020, politicians planned to increase that to £10,000. The government now proposes raising the cap to £15,000 – and while politicians say the average landlord will pay less than £7,000, independent research by Reapit says the average bill will be £10,442.

Property industry groups have warned that the push for EPC C is bad news for the private rented sector. Propertymark has said that landlords need more grant funding to help them pay for upgrades. The National Residential Landlords Association says that a longer deadline is needed due to a shortage of tradespeople to do the work.

Tenant groups have been more positive – although that may change if new regulations lead to higher rents or more evictions. Generation Rent welcomed the move and said it is looking forward to working with the government.

What else does the consultation cover?

Unsurprisingly, the deadline and the cost have received most of the attention from commentators. But the consultation covers many other topics related to energy efficiency, some of which landlords may welcome.

• EPCs could be calculated differently. The proposed Home Energy Model would divide EPC scores into a fabric performance metric (covering insulation, double glazing and other material upgrades), a heating system metric, a smart readiness metric, and an energy cost metric. Under the government’s preferred option, landlords would be required to invest in the building’s construction and materials first before making other energy efficiency upgrades such as upgrading the boiler or installing smart heating controls.

• Currently, landlords who invest up to the cost cap can apply for an “All relevant improvements made” exemption that lasts for 5 years. The government proposes extending this to 10 years.

• Landlords could qualify for a reduced cost cap of £10,000 if the full £15,000 cap would be unaffordable. The government is considering a range of options for this including means testing for landlords, basing the exemption on the property’s Council Tax band, or basing it on charging a below-market rent.

• EPC requirements could also be applied to short-term rental properties. Currently there is no energy efficiency requirement for short-term rentals, but the government is concerned that landlords could convert their properties to short-term lets and reduce private rented sector stock.

• Landlords could also be given new grounds for exemption from meeting the minimum EPC. As things stand, they can be exempted due to high cost, property devaluation, third-party consent requirements for works, or (for wall insulation only) structural unsuitability. The government is asking if there are any other circumstances that should qualify landlords for an exemption.

• While some responses to the earlier 2020 consultation called for a ban on advertising properties that don’t comply with the EPC rules, the government does not plan to do this. However, this could change once the private rented sector database laid out in the Renters’ Rights Bill is brought in.

What do you think about the government’s proposals? Have your say using the government’s online survey.