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Energy efficiency upgrades could lead to higher rents, admits UK Government report

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Renters could be faced with higher bills as a result of Government-mandated energy efficiency upgrades, a UK Government report has revealed. 

Since April 2018, landlords have been required to meet a minimum level of energy efficiency for privately rented properties in England and Wales. When the UK Government first signed the legislation into law these properties had to achieve an EPC rating of at least E before landlords could grant new, renewed or extended tenancies. Since April 2020, however, all tenancies must meet an EPC rating of at least E

The need to upgrade properties to reach energy efficiency standards will inevitably incur a cost, and despite the UK Government now offering cash towards the cost of energy efficiency upgrades, through schemes such as the Green Homes Grant, many landlords could pass that cost onto their tenants in the form of rent price hikes. According to the report, one in five landlords said that they will consider upping rent prices as a result of the additional burden placed upon them by new legislation, such as the need to achieve an EPC rating of E.

While some may face higher rent bills, it’s hoped that their monthly utility costs will come down in tandem. The Government’s legislation applies to the worst offending properties, where data shows the average annual cost of energy is around £2,860 for a property in band G and £2,180 for an F rated property. Meanwhile, properties rated E have average annual energy bills of around £1,710

Digging deep

According to the report, the majority of landlords will fund the energy efficiency upgrades out of their own savings, but some see the energy efficiency requirements as another financial burden placed upon them by the Government. One respondent noted, “With the stamp duty increases, with the lack of mortgage interest relief that’s been phased in, and now the EPC regulations, the government are just making it more difficult to be in this business.”

The Government isn’t too concerned about landlords leaving the sector due to the requirement for energy efficiency upgrades, however. It noted that the number signalling their intention to leave was small, although in Wales that number could be as many as 11%, according to the 2018/19 Welsh Landlord Survey. 

Worryingly, there are still some landlords who would rather skirt the energy efficiency improvements altogether. Around 1% of landlords responded to the survey noting that they would continue letting their property out regardless of the consequences — which in this case would be a fine of up to £5,000 for non-compliance. 

Additionally, 4,024 landlords had registered for exemptions by the end of January 2019. That compares favourably to the 290,000 F and G rated properties in the sector prior to the regulations coming into force, but 60% of those exemptions were due to landlords not wanting to front the cost themselves. That exemption has now been removed, meaning some landlords will have to swallow the cost of the energy efficiency upgrades regardless.

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