By Neil Turner, Director, Howarth Litchfield
There is much talk in the media of changes to Energy Performance Certificates (EPC) on rental properties requiring landlords to have a minimum rating of C on their properties. This is all part of the Government’s target of achieving net zero by 2050.
Surely, it’s a good thing that properties will be improved, which will create better living conditions and ideally, houses that use less energy, resulting in lower energy bills for tenants?
Well, it’s never that simple. To get properties up to the standard by 2030 is going to require some significant investment as currently only 48% of properties meet the new minimum standard.
I have seen landlords complaining about investment costs of £15,000 and even young renters worried that the investment costs are going to be directly passed on in the form of higher rents.
According to Zoopla (December 2024) rents for new lets are £270 per month higher than three years ago, making the average annual cost £3,240 higher since the pandemic. This means that the average rental cost has risen by 27 per cent since 2021 compared to earnings growth of 19 per cent.
Zoopla also predicted that average UK rents will rise by a further four per cent in 2025. However, there is some good news in that annual rate of rent inflation is now at 3.9 per cent, which is a little lower than previously.
So, what can be done? For a start I would create a new version of the EPC, as it is outdated and often badly calculated by inexperienced assessors. Notwithstanding that, a system of recording is needed, in whatever format deemed to be modern and workable.
At the heart of the issue is the fact that UK housing stock consists of poor, old and not well-maintained properties, throughout both the private and rental sectors. Common sense improvements like loft insulation, cavity wall insulation and low energy LED lighting all help the rating.
I have little sympathy for landlords complaining of having to invest – a recent survey by Goodlord said the average landlord was only willing to invest £2400. Surely keeping the property well maintained helps to maintain investment value as well as marketability? Spreading the investment across the next few years would also assist. The UK, ‘Homes (Fitness for Human Habitation) Act 2018 ‘requires proper ventilation in rental houses’.
So how do we incentivise landlords to upgrade in a way that actually benefits everybody in society? A better-quality housing stock with warmer houses, free from mould and damp, would help tenants, young and old alike.
I believe it’s a carrot and stick issue. Let’s encourage everyone to invest by giving tax credits on the investment. California for example, gives a 30% tax credit on solar panel systems installed, which provides a powerful incentive to do something.
In the UK, there are various government grants available to support green energy initiatives on boilers, PV generation and insulation, but they are complicated and don’t cover the full costs – in most cases, they are subject to income.
My suggestion is that everyone who makes their houses warmer, greener or better ventilated (landlord or homeowner), be offered tax credits, cheaper mortgages or reductions in council tax; then there would be a much larger take up of building improvements and upgrades.
The boost to the economy of these changes in the building industry would offset the perceived loss of tax.
If we want landlords to invest, then simply telling everyone to improve, will only lead to people doing the minimum work (to achieve standard C, for example) not necessarily the right thing. The housing stock in the country needs investment and we need good housing. It would be good to square the circle.
Neil Turner, Director, Howarth Litchfield can be contacted on 0191 384 9470 or email n.turner@hlpuk.com
www.howarthlitchfield.com