The return of the EPC rating upgrade

We may all remember the plethora of articles that discussed the topic of EPC ratings for rented properties, and the Conservative’s plan for the MEES legislation. If like me, you have read these articles and became somewhat of an expert in the matter. Well you might be pleased to know that it’s likely more will come.

Perhaps you breathed a sigh of relief when back in September, under the Conservative leadership, the then prime minister announced intentions to revise the targets set and planned to introduce “Home Energy Model” assessment in place of EPC assessments, which as we know are somewhat flawed, and therefore with the aim to provide a more thorough and accurate measurement of the property’s energy efficiency.

However, this never came to pass and now under the Labour leadership it appears the EPC energy efficiency rating is due to return. A good question to ask is why thisU-turn?

Labour’s plan

Labours focus is to reduce the impact of energy poverty for many tenants, impacted by the rising cost of living, in particular household energy bills. And in their manifesto they highlighted their plan to ensure private rented homes meet minimum energy efficiency standard of C rating by 2030, potentially saving renters as much as £500 per year.

But can this plan achieve what Labour now propose?

It is worth mentioning that the finer details of the Labour proposal are not yet fully known, however if as it appears on face value, to be similar to the Conservative old plan, well there are many unresolved issues with the energy rating process as it stands.

For example many feel that the EPC rating system is flawed and in need of an overhaul. The EPC measurement is not based on the energy efficiency of a home but rather the cost effectiveness. So if the intention is to reduce carbon footprint, to improve energy efficiency, a revised measurement system is surely needed. Also consider the age of the property stock in the private rental sector, many are constructed 60, 70 or more years ago, and to raise their energy efficiency to C would be nearly impossible without knocking down and starting again, and not to mention the disproportionate costs to upgrade versus the value of the property.

And while any saving on household bills would be welcome, the costs incurred in upgrading the property by the landlord will likely be passed on to the tenant in increased rent, therefore cancelling out any of the proposed benefits that Labour suggests.

What have landlords done and what needs to be done?

Despite the uncertainty of the government plans, regardless of which one is in power, landlords took on the challenge of upgrading properties to achieve energy efficiency of C or above. It is reported that 55% of rented homes now have an EPC rating of C or above demonstrating the commitment from many of the landlords.

However, to meet the 2030 target to raise energy efficiency in private rented homes, it is estimated that this will take longer than the proposed 2030 and more like post 2040 at the current rate. Or if they were to hit the target set of 2030, approx. 340,000 homes would need to improve each year which is beyond the realms of possible.

Also, we see many landlords selling their less energy rated properties without carrying out any upgrades, for then the next owner occupier picks up the task and cost of upgrading their new home to make it more energy efficient.

So what could be done?

Certainly, before any further decision is made by the Labour government, it would be prudent to speak to those involved, the broker community, the landlords and lenders to see how a revised policy could work. This opportunity is missed by the last government.

Also look at alternatives to the current EPC rating system and measurement, perhaps build in parameters that take into account year of construction, consider incentives for landlords to make the needed upgrades such as government led grants and schemes.

But whatever the outcome, 2030 is not far away, and so any decision must be made soon with the private rental sector, the tenants and landlords