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Policymakers must learn from the mistakes of previous EPC proposals

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In his latest Mortgage strategy blog, Managing Director for Mortgages, Richard Rowntree, explains what the government can learn from previous proposals for private rented sector energy efficiency regulations.

The scrapping of proposed Energy Performance Certificate (EPC) standards for rental property by Rishi Sunak last year temporarily paused the private rented sector’s (PRS) Net Zero journey rather than halting it permanently.

The 2050 commitment, enshrined in law, means that it’s not of a question of whether we have to upgrade UK rental homes; it’s an imperative.

While the backpedalling is frustrating, the U-turn highlights how the Government does acknowledge the challenges that proposals posed to landlords and the potential impact that additional legislation could have on much-needed future investment in rented homes.

It also offers the chance to learn from the mistakes of the first set of proposals.

One of the most obvious of these was the timescale; the deadline set out in the original proposals was simply too short. When we published our Rented Sector Energy Challenge report last year, we calculated that if the policy had been confirmed on 1 August 2023 and brought into force on 1 April 2025, 3,742 homes would have needed to be upgraded per day, more if we discounted weekends and bank holidays.

Anyone who has had any work undertaken on their own home over the past couple of years will know that finding tradespeople to do this is no mean feat. And it’s not just a case of finding someone who has the availability, it’s also about having the skills and knowledge of what is a rapidly evolving, technologically-focused industry.

Without this, landlords could end up spending their time and money on upgrades that are of poor quality or worse, unsafe.

Spray foam loft insulation presents a case study of some of the issues that can arise in the absence of some sort of quality assurance, similar to the British Standards Institution’s Kitemark.

Several earlier applications of spray foam suffered from a lack of ventilation and condensation, leading to dangerous deterioration of the roof. Removing the spray foam can be difficult and sometimes requires roofs to be replaced.

Of course, some homes could be made more energy efficient with relatively minimal upgrades but the profile of PRS stock, a substantial proportion of which is made up of Victorian-era terraces, HMOs and 1950s semis, means that extensive work will be required.

The challenge for a new Government is how to address these issues without causing huge disruption to a rental market already under strain.

The good news for any incoming Minister is that landlords aren’t sitting on their hands and waiting. The number of EPC C+ homes in the PRS has grown significantly over the past decade and the proportion of homes in the sector at this level is now above owner-occupation.  

Research carried out for our recent Portfolio Landlord Report offers insight into how the reinstatement of the policy in some form would influence landlord investment in improving the energy efficiency of PRS properties.

Encouragingly, such a move would seemingly have little impact on the 32% of landlords whose properties are already rated EPC C or above. Then there’s the 37% who have continued to carry out works necessary to bring their properties up to the same standard, where possible. This offers opportunities for brokers as some landlords will need advice on the finance options to facilitate upgrades.

Alongside this improvement, a smaller but not insignificant proportion of landlords, 16%, said that they delayed upgrading their properties until the Government’s position has been set out with legislation.

Although the latest polls show that Labour has lost some of the lead it had over the Conservatives, a change of Government between now and the next General Election deadline is looking extremely likely.

Despite Labour recently announcing that the previously pledged £28 billion of green investment will be slashed by around half, a move that will see the amount spent on insulating homes reduce from up to £6 billion a year to around £1.3 billion on average, the shadow secretary for climate change, Ed Miliband, has stated that he is in favour of rented properties needing to achieve EPC C as a minimum.

We welcome the direction of travel, but whichever party is in power must focus on policy that addresses the complex needs of upgrading millions of homes. Time is running out and we can’t afford the same mistakes as the previous set of proposals.

This article was first published in Mortgage Strategy.