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The private rented sector energy challenge

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Our new report - The rental sector energy challenge - highlights how with support for landlords, alongside clarity on proposed changes to energy efficiency standards, we can build on the progress that has already been made in developing sustainable privately rented housing.    

Proposed tougher energy efficiency requirements for rental properties are already influencing landlords’ buying decisions, with a quarter acquiring higher-rated properties, our new report has revealed.

Under Government proposals, new rental tenancies will require a minimum Energy Performance Certificate (EPC) of C by April 2025, with all tenancies meeting that standard by 2028. However, it is over two years since the proposals were made and it is widely expected that the Government will delay the implementation.

The rental sector energy challenge, based on a survey of over 1,200 landlords, found that the energy efficiency proposals are already influencing the business strategy of six in 10 landlords, including:

  • 15% have purchased property with an EPC rating of between A and C in anticipation of the tougher requirements
  • A further 10% have acquired D-rated property with a view to upgrading
  • 14% are retrofitting properties to increase the EPC to C
  • 9% are selling property too expensive to meet the energy efficiency upgrades
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The report also examines how the energy performance of property in the private rented sector has improved over the past decade on the back of landlord investment, with the proportion of properties at EPC A-C now higher than in the owner-occupied sector.

It investigates landlords’ awareness of the Government proposals and how they would adapt their portfolios to meet the minimum standards if introduced as proposed. We also examine some of the barriers they face to upgrading property and what action and support they would like to see from the Government and finance sector.

Since first being announced by Government in 2020, information on the proposed regulation changes has been scant. Research undertaken for the report suggests that this lack of direction is leading some landlord reluctance to take action, instead preferring to wait until they better understand the implications and their responsibilities.

Richard Rowntree, Paragon Bank Managing Director of Mortgages, says: “It’s encouraging to see landlords are building on the progress made over the last decade in making privately rented homes more sustainable.

“Most commonly, this has been through buying homes that already meet the new standards proposed by the Government, incentivised by green mortgage products. But, with a significant proportion of landlords already making upgrades to improve the energy efficiency of the properties they already own, or planning to do so in the future, we see a need for financial support as well as education on what can be a complex and costly undertaking, something that presents huge opportunities for the sector.

“Our report, The rental sector energy challenge, is an example of how we’re examining the issue in a bid to learn more about the support we can provide landlords.”

Download report