The latest research from Foundation Home Loans for Q3 2024 has revealed that just over two-thirds of landlords (67%) currently own at least one property that does not meet the new requirements for the government’s proposed EPC ‘C’ targets.
These findings, from the Q3 2024 Landlord Trends research conducted by Pegasus Insight on behalf of Foundation Home Loans, are based on 720 online interviews conducted between September and October this year.
This comes in response to a recent government announcement that it will shortly consult on proposals for private and social rented homes to achieve Energy Performance Certificate C or equivalent by 2030. Currently, private rented homes can be rented out if they meet Energy Performance Certificate E, while social rented homes have no minimum energy efficiency standard at all.
On a positive note, awareness of these EPC standards is high, with 92% of landlords having at least some knowledge of the requirements. However, only two-thirds (67%) report a thorough understanding of the details. Notably, portfolio landlords with four or more buy-to-let mortgages demonstrate slightly lower comprehension of the potential regulations, with 62% stating they fully understand the requirements compared to 69% of unencumbered and consumer borrowers.
When it comes to meeting these EPC standards, 42% of landlords intend to make the necessary improvements to bring their impacted properties up to standard. Of these, 24% plan to carry out works at the minimum cost required to comply, and continue to let the property out, 14% aim to carry out the works that maximise the long-term value of the property, and continue to let it out, while 3% will carry out works to bring it up to standard then sell it.
In contrast, 34% plan to sell without undertaking any work or not re-let the property, 17% responded ‘other’ and 3% don’t plan to carry out any works but continue letting the property out.
For those who plan to carry out the necessary work, most expect to fund the improvements through savings (71%), rent increases (42%) or government grants/funding (28%), with a further 12% saying they would release equity from their portfolio and 5% seeking a further advance from a mortgage lender or a loan (5%).
The expected financial commitment is significant, with landlords estimating an average cost of £12,000 per property to achieve an EPC ‘C’ rating. Planned upgrades include solid wall or floor insulation (37%), loft insulation (26%), boiler or heating system upgrades (25%) and solar PV panels (22%). Notably, 13% of landlords remain uncertain about the specific improvements needed, while 37% are unsure of the total potential cost per property.
Grant Hendry, Director of Sales at Foundation Home Loans, commented:
“With potential new legislation aiming to raise energy efficiency standards and tackle fuel poverty for millions, landlords face important decisions around future-proofing their investments from an EPC perspective.
“Thankfully, this research helps demonstrate growing awareness among landlords around this topic and highlights both the financial and planning considerations involved in meeting these requirements. It also underlines the tremendous potential for lenders and intermediaries to support sustainable practices in the buy-to-let sector, particularly through tailored green mortgage products that align with both regulatory demands and landlords’ unique needs.
“As landlords adopt varied approaches to meet these standards, ranging from minimal-cost upgrades to comprehensive property improvements, it’s clear that personalised guidance is essential. Green mortgage solutions can offer landlords a strategic way to finance these upgrades, enhancing property value and reducing long-term costs. For lenders and intermediaries, these conversations not only strengthen client relationships but also broaden the scope of services in a sector increasingly focused on sustainability.”
