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EPC Standards Influence Landlords’ Property Preferences: Majority Avoid Sub-C Rating

Published by Chirag
Published Date: September 19, 2023

Recent data highlights that more than 71% of landlords are hesitant to invest in properties rated below EPC C, reflecting the significant impact of EPC(Engineering, Procurement and Construction) standards on their decisions. As property portfolios expand, landlords' inclination to purchase properties below the C rating diminishes.  A striking 74% of landlords managing between six to ten properties have expressed their reluctance to acquire properties with EPC ratings ranging from D to G.

Although these plans have yet to be legislated, government ministers have previously proposed that as of April 2025, newly rented properties in England and Wales must meet a minimum EPC standard of C, surpassing the current E standard. This regulation is also set to encompass existing tenancies starting in 2028.

High Awareness of EPC Changes

A noteworthy 71% of landlords surveyed expressed full awareness of the impending changes to EPC rules, while 24% were vaguely aware of forthcoming adjustments, leaving only 4% completely unaware of the rule changes. Merely 18% of landlords indicated that EPC ratings would not influence their purchasing decisions.

EPC Standards for properties

Regarding renovations for properties falling below the C rating, 37% of landlords plan to perform the necessary upgrades at the minimum cost required for compliance. Nearly one in five (20%) intend to invest in renovations to maximise the long-term value of their property. However, a quarter of landlords indicated they would refrain from any renovations, instead opting to sell the property or refrain from re-letting it.

Financial Considerations for EPC Improvements

Landlords anticipate an average cost of just over Β£10,000 per property to meet the requirements for achieving an EPC C rating. For those with larger property portfolios, this cost increases to over Β£11,500. According to the survey, over half of landlords (57%) plan to finance the necessary improvements through their savings, while 33% plan to raise rents. An additional 18% intend to explore government grants or funding options. Another 19% consider either securing a further advance from their lender or obtaining a loan, which represents a slight decrease from the previously reported 20%.

EPC Standards for properties

Experts in the field suggest that while certainty and clarity are still awaited regarding the government's timeline for introducing legislation mandating minimum EPC levels for the private rental sector, it is evident from this research that landlords are well-informed about impending changes. Landlords are now seriously contemplating how to address improvements in their existing portfolios, funding strategies, and their future plans.

Future-Proofing Investments

It comes as no surprise that landlords prefer properties with higher EPC ratings. With the expected cost of over Β£10,000 per property to elevate the EPC level to C, their reluctance to invest in properties below this standard can be seen as a proactive move to safeguard their portfolios. In essence, they are future-proofing their investments by focusing on properties rated C and above for future acquisitions, while addressing the properties in their existing portfolio that do not meet this criterion.

Interestingly, the majority of landlords express their intent to fund the necessary work through their savings, raising questions about whether they will indeed follow through with this approach or opt for alternative financing methods when the time comes.

Chirag
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