Proposed EPC changes - Landlords, Be Prepared!
Rhys, Senior Property Advisor, discusses proposed EPC changes the government are likely to introduce by the end of 2025 and how this will impact landlords...
Estimated reading time: 5 minutes.
As things stand, rental properties require a minimum Energy Performance Certificate (EPC) rating of E, but big changes could see that minimum requirement become a C by the end of 2025.
This means landlords in Cardiff need to pay close attention because if their rental properties have an EPC rating of D or E, which are both currently legal, they will need to carry out necessary improvements within the next 3-4 years to meet the rating of C that the government are keen to introduce as the new required minimum.
Tip: With landlords and agents busy preparing for the
Renting Homes (Wales) 2016 Act coming into force on December 1st 2022, now is a good time to start looking at the bigger picture, taking stock of your current energy ratings and assessing whether any work is needed. Planning in order to future-proof your investment is always a wise decision, so think ahead and consider finance options sooner rather than later if you're concerned about a low EPC rating. Well-considered improvements are likely to lower energy bills and potentially increase the property’s value, make it more appealing
to potential tenants who want energy efficient homes (mean you can justify
increasing rent where suitable).
Read on to learn more about the proposed EPC changes and the sort of impact this could have on landlords.
What is an EPC?
The EPC, or an Energy Performance Certificate, is the official energy efficiency rating of a property. The ratings range from A, which is the best, down to G, which is regarded as the least efficient.
Since October 2008, it has been a legal requirement for all properties listed on the market to have their EPC included within the particulars, and rental properties have legally required an EPC rating of E or better since April 1st, 2018.
The UK Government now hopes to raise the required EPC rating from E to C by the end of 2025.
Old housing situation in Cardiff
In Cardiff, we’re blessed with a huge variety of properties, many of which are older Victorian style houses steeped in character, and blocks of flats in all styles built many decades ago.
Although this adds plenty of personality to the suburbs of our city, it can also pose energy efficiency problems for said properties.
Many of these old period homes in Cardiff have poor insulation and this typically results in a lower EPC rating when compared to newer build properties, unless the necessary work - which of course, comes at a cost - has been carried out.
It’s estimated that the average property EPC band in Wales is D, and with a fair sum of those properties being rental homes, it means many landlords in Wales will have to conduct some sort of energy improvement work to raise their EPC band rating within the next few years.
In contrast, the majority of modern newbuilds already have an EPC rating between A-C.
Read: How landlords can improve the EPC rating of their rental property
Why are EPC ratings becoming more important?
There are two main reasons as to why EPCs are becoming more important and why the government is looking to ensure the EPC rating of properties across the country improves.
1. With electricity and gas prices increasing due to the price cap the government puts on energy supplier charges being lifted, it means we are all experiencing a sizable increase in our energy bills. Homes with higher energy efficiency will be in higher demand, as less energy will be required to heat them - therefore, energy bills for better energy efficient homes will naturally be lower.
2. New legislation will likely require landlords and owner-occupiers alike of properties with poor energy efficiency to create a better energy-efficient home to help the UK government meet emissions targets in the fight against climate change.
Government targets for EPC improvements
The incentive for owner-occupiers to improve their home’s energy efficiency is easy to see, as it reduces their bills and also makes their property more attractive to buyers when it comes to selling.
The incentive hasn’t been quite as strong for landlords with rental properties, as in most cases the energy bills aren’t directly affecting them if the tenants cover this. However, with rising energy costs, tenants are now more aware than ever of the need to find an energy efficient rental property, so the focus among property investors is quickly growing as they look to improve the energy-efficiency of their investments.
Once the government has introduced the new EPC minimum, landlords will have no option but to raise EPC bands to C, so it could be wise for landlords to make the relevant improvements over the next 3 years to spread the cost.
The Government aims to ensure all new tenancies that start from December 31st, 2025, onwards legally require a minimum of a C-rating on its EPC. For all existing tenancies, this legal minimum EPC rating requirement will apply from December 31st, 2028 - meaning all rental properties will need a minimum C-band rating as we enter 2029.
Read: How much value can solar energy add to a home?
Will any properties be exempt?
There are likely to be a few exceptions to these EPC changes, but not many.
Listed building and buildings with restrictive covenants that would have to undergo what is deemed as unacceptable changes to their appearance during energy efficiency improvement work would be the most likely exemptions.
Temporary properties, and properties that are used for 4 months or less per year may also be exempt.
Here at CPS Homes, we have the experience and know-how to help you manage your property investment in Cardiff. From finding the perfect property to let out, to sourcing tenants and managing the property with a range of property management services to make your life that little easier, our friendly lettings team are on hand with advice and expertise. Contact us today by calling 02920 668585, e-mailing enquiries@cpshomes.co.uk, or popping in branch to speak to us.
