New energy efficiency rules for rental properties

Landlords will need to make sure rental properties have a minimum Energy Performance Certificate (EPC) rating of C by 2030.

The new requirement is part of the government’s Warm Homes Plan, originally outlined in its election manifesto.

Read on for everything you need to know new energy efficiency rules, plus how they could affect the buy-to-let market.

Increased energy efficiency standards return with new deadline

The Labour government has brought back plans to increase the energy efficiency of rental properties first put forward by the Conservative Party.

The previous government initially planned to increase the minimum EPC rating in rental properties from E to C between 2025 and 2028.

However, in September 2023, former prime minister Rishi Sunak scrapped the changes with the aim of reducing costs for households.

Ed Miliband, the Energy Security and Net Zero Secretary, hasn’t yet revealed full details of Labour’s plans to increase EPC ratings. However, the original deadline of 2028 has been pushed back to 2030.

Since 2020, there has been a minimum EPC rating of E for all residential tenancies.

Will all rental properties meet the 2030 EPC deadline?

At the current rate that landlords are making energy efficiency improvements, it would take until 2042 for all rental homes to meet the new standards, according to research by Hamptons.

To meet the 2030 target, it’s estimated that each year around 340,000 rental homes will need to make improvements to achieve a minimum EPC rating of C.

Estate agency Hamptons’ analysis of Ministry of Housing, Communities and Local Government data shows that so far this year, 39 per cent of rental homes with new EPCs have moved into a higher band.

More than one in 10 (13 per cent) dropped into a lower band, while 48 per cent saw no change.

Over half (55 per cent) of rental properties with a new EPC this year have a rating of C or higher.

It’s estimated that up to four per cent of rental properties won’t achieve a minimum EPC rating of C.

Significant cost of increasing EPC rating for many landlords

A Simply Business study of almost 1,500 landlords in 2023 found that 42 per cent considered making their property more energy efficient as their biggest challenge.

Almost a fifth (18 per cent) anticipated energy efficiency improvements could cost them over £10,000. Meanwhile, a quarter (25 per cent) expected them to cost between £5,000 and £10,000.

There’s likely to be a spending cap (a maximum amount owners would need to spend on improvements), which could be less than £10,000. As a result, many landlords may spend the maximum on improvements without reaching the desired minimum EPC rating.

Higher EPCs could lead to increased tenant demand

Rental homes that are more energy efficient could reduce utility bills for tenants.

Hamptons’ research shows that a tenant living in an average property with an EPC C rating would pay £499 less a year in utility bills, compared to a tenant living in an average property with an EPC D rating.

The difference is even bigger between typical properties with EPC C and EPC E ratings, with an estimated annual saving of £1,248.

EPC rating	Average size (sq m)	Average annual running cost 2024
A	78	£1,046
B	66	£711
C	68	£983
D	75	£1,482
E	80	£2,231
F	87	£3,242
G	90	£5,462

Source: Hamptons and Ministry of Housing, Communities and Local Government

With the rising cost of living remaining a concern for many tenants, demand for properties with higher EPC ratings could increase.

This means that while energy efficiency improvements may be costly for landlords, in the long term the cost could be offset by higher average rents and shorter void periods.

Changes to energy efficiency rules – what happens next?

In the first instance, the government will need to provide more details on how the new rules will work. For example, landlords will be keen to find out:

how assessment of properties will work
how exemptions will work
what the spending cap for improvements will be
whether extra funding or support will be available

Next, the government will need to draft new regulations. Before this, there could be a consultation.

What about energy performance ratings in the rest of the UK?

The UK government sets EPC ratings in England and Wales, so the changes mentioned relate to properties in these countries.

However, the Scottish government ran a separate consultation on the same issue in 2021. There are also a different set of energy efficiency regulations in Northern Ireland.

How do you feel about the government’s decision to bring back EPC changes for rental properties? Let us know in the comments.

More guides for buy-to-let landlords

Photograph: Proxima Studio/stock.adobe.com

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