New energy-efficiency rules mean it makes even more sense to invest in new-build homes

The UK has a target of reaching net-zero carbon emissions by 2050 and it seems safe to assume that maximising the energy efficiency of each household will be crucial to achieving it. To make this happen, the government is regulating both home-builders and the private-rented sector to force them to meet or exceed minimum standards of energy efficiency.

All properties to let must now have an EPC rating of E or better

Back in April 2018, the government introduced rules which mandated that landlords in the private rented sector could only offer new tenancies on properties with an energy rating of E or better. The definition of new extended to formally-renewed tenancies but did not cover “rolling” or open-ended tenancies.

As of 1st April this year, however, the requirement will extend to all tenancies, which means that landlords will need to do their sums and think carefully about what it means for them.

Landlords need to check if the cost of necessary updates can be recouped in rent

This is the key question for landlords with properties rated F or G and the answer will, of course, depend mainly on the cost of undertaking the updates (plus the state of the local market in the area).

Mark Burns, Managing Director of Manchester estate agents Indlu advised: “If a property is already just short of the coveted E, then all it may need is a small and affordable push to get it over the finishing line. This might be something as simple as switching to energy-efficient light bulbs or improving the draft proofing.”

“If, however, the property comes firmly under G, then you could be looking at much more expensive updates, such as switching from single glazing to double glazing or even having to use super-energy-efficient, heat-retentive glass or changing out an old boiler.”

Older properties may be uneconomical to update

As a rule of thumb, the older a property is, the more expensive it is likely to be to update it to modern standards and the more likely it is that you would need to move out tenants to do so. For example, if you still have an old-school “back boiler” then switching it out for a modern, energy-efficient, combi-boiler could require floors to be pulled up for new piping, plus a water tank to be removed.

Even “E-rated properties” may not be “safe” for long

While an E rating is a meaningful improvement over an F and a significant improvement over a G, on the general scale of what can be achieved even now, it’s really not that high. New-build properties typically score at least a C, many are B and some are even A.

It’s therefore entirely possible that the government will increase the energy-efficiency baseline in the PRS, especially since it will probably be much more difficult for them to force private homeowners to spend their own money on updating their property to improve its energy efficiency.

That being so, any landlord who has a property rated lower than a C might well want to consider if it is worth holding on to it or if it’s more astute to sell it in a controlled way and replace it with a new-build property built to a higher standard of energy-efficiency and hence better future-proofed against likely changes. Any landlords thinking of selling their property should consider using any one of the free property valuation tools online to check the current market value before deciding on whether to cash in or to wait until the market value increases.

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