By Sophie Mitchell-Charman, Commercial Director
Is it just us, or has the flurry of attention being paid to upcoming EPC changes quietened down?
After the government announced its intention to have all new-build private rentals be an EPC C by 2025 – and 2028 for the rest – lenders, brokers and landlords alike kicked into gear to understand and get ahead of the changes.
Green ranges were launched, incentivising landlords to purchase properties with higher EPC ratings, and the advantages of bridging and bridge-to-let loans in helping landlords meet the demand early was communicated widely.
In the last few months, however? Very little.
So why has the market gone quiet on these quite seismic changes to the rental sector, and what should landlords do?
Probably the most immediate answer to why the market has gone quiet around EPC deadlines is the amount of political uncertainty.
The intention to set these standards was made in 2021, however confirmation of the new changes and the 2025/2028 dates has not been forthcoming. The longer this has been delayed, the more landlords have begun to call for a delay to implementation.
Landlords have made some moves to address EPC ratings in the mean time, but with housing ministers coming and going, and three Prime Ministers through the doors since the first announcement, they can be forgiven for thinking these priorities might change.
Other factors have been at play since then as well: inflation, remortgage costs, labour and material shortages.
All of this creates an environment where landlords are naturally cautious about committing to a large capital expenditure to upgrade their properties, especially if they have large portfolios.
What are landlords saying?
Recent research from MFS showed nearly 80% of landlords have at least one property with an EPC rating of D or below, while only 58% are aware of the upcoming changes to the rules, with just over a third (38%) saying they fully understand the new regulations.
Overall, it is a messy picture, with landlords not knowing whether to stick or twist over the changes which could be as little as two years away.
What should they do?
Lenders across the board reacted to the changes encouraging landlords to be proactive and future-proof their properties ahead of EPC changes and a culture focussing on the reduction of emissions and home efficiencies.
In a busy two years for remortgage business, lower rates for higher EPC properties clearly set the stall that this is where landlords’ priorities should lie.
The case to make the investments in energy efficiency – regardless of the threat of increased regulation – has been made pretty comprehensively this past winter as well, where a cold snap combined with skyrocketing energy bills put pressure on tenants’ finances, and on landlords who include bills within the cost of their rent.
Investments now in these efficiencies will start paying landlords back over the next few winters, and if the 2025 and 2028 deadlines are still enforced, then they are already ahead of it.
Being flexible with financing this will be key, we’ve spoken a lot to landlords about the advantages of capital raising against one property to fund works across the portfolio, or alternatively using a bridging loan or bridge-to-let finance.
Like a Buy-to-Let itself, meeting EPC changes are an investment opportunity that can return rewards for landlords prepared to do it. It is up to brokers and lenders to continue facilitating it.