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Insights

The rental sector energy challenge

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The need to improve the energy efficiency of the UK’s privately rented homes is clear, but doing so presents significant challenges.

The property sector must support landlords to overcome these, facilitated by Government policy that considers any potential negative impact of its implementation.

Richard Rowntree, Managing Director for Mortgages, introduces the rental sector energy challenge report below. Download the report here.

Domestic properties account for approximately 30% of energy use and around 19% of green­house gas emissions in the UK, according to Business, Energy and Industrial Strategy Committee data.

Minimising this impact is a central component of the Government’s drive towards Britain producing net zero carbon emissions by 2050 and it appears that private rented sector properties (PRS) will be the first to be subjected to new laws requiring homes to be more energy efficient.

The Government has proposed that from 2025 all properties let under new tenancy agreements will need to be rated Energy Performance Certificate (EPC) C or above. This would then extend to all PRS properties by 2028.

Looking at the existing Minimum Energy Efficiency Standards (MEES) regulations suggest that landlords are engaged and largely compliant with theenvironmental aspects of their lettings business.

Despite this, a lack of awareness of the proposals is evident and little in the way of detail has been provided by the Government.

Awareness of the proposals is just one issue; another considerable challenge is the cost of upgrading PRS properties to meet what is expected to be the new required standard.

The stock profile of the PRS means that a large number of properties were built decades ago, many pre-Second World War before some of the sustainable construction methods and materials of today had been developed. Ensuring these homes hit EPC C will likely require costly retrofitting of technologies that help to make heating, insulation and lighting greener.

This means that mortgage lenders have an important part to play in supporting landlords.

Without this support, and the full backing of politicians, we may see landlords cut their losses and exit the sector altogether, concluding that the challenge is greater than the reward.

With rental costs facing upward pressure resulting from increased overheads for landlords and an imbalance between the supply and demand of rented homes, fewer privately rented homes is a scenario that would be unwelcome by those that understand the need for housing tenures that work in harmony.

Download report

Richard Rowntree

Richard Rowntree
Managing Director for Mortgages