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 proposed 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 about plans for 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 proposed deadline of 2028 has been pushed back to 2030.

The Warm Homes plan is due to be delivered later this year. The government has said its plans for higher energy efficiency standards in the rental sector will ‘lift over one million households out of fuel poverty by delivering warmer homes and cheaper bills’.

Since 2020, there’s 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 between January and August 2024, 39 per cent of rental homes with new EPCs 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 during this period had 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 2,000 landlords in 2024 found that 33 per cent considered making their property more energy efficient their biggest challenge.

Half (50%) of landlords said they’ll need to make improvements to their property to meet a minimum EPC standard of C by 2030.

More than one in 10 (11 per cent) anticipated energy efficiency improvements could cost them over £10,000. Meanwhile, over a third (34 per cent) expect them to cost between £1,000 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 says it will ‘consult on boosting minimum energy efficiency standards for all renters by 2030’.

The consultation is likely to cover issues such as:

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

Then it will need to draft new regulations and a timeline for implementation.

More broadly, the government is consulting on improving the Energy Performance Certificate system. The consultation includes some proposed changes for landlords:

requiring a new EPC at the end of a tenancy, even when the same tenant renews or extends their lease (currently a new EPC is only required every 10 years)
scrapping the 28-day grace period for buildings to be marketed for sale or let without an EPC
requiring HMOs to have an EPC for the whole property even if only one room is rented out

The EPC consultation closes on 26 February 2025.

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 plans for higher EPC ratings in rental properties? Let us know in the comments.