Why EPCs could drive rents even higher

Under legislation currently working its way through parliament, privately rented properties will need to have an EPC rating of C or above. This could lead to  many thousands of homes taken out of the rental market..

The Minimum Energy Performance of Buildings Bill mandates that privately rented properties have an Energy Performance Cenrtificate of C or above. This is set to come into force in 2025 for new tenancies and in 2028 for existing tenancies. The penalty for non-compliance is up to £30,000.

Whilst this is commendable from a net zero perspective, it could have far reaching consequences for the availability of rental stock. CBRE delved into the numbers.

According to the government's figures, there are 2.26 million privately rented homes in the UK. Of these, 64% do not meet the new EPC standard. 1.4 million properties will need to be upgraded over just six years.

However, the Housing Ministry's own figures state that 478,000 of these, no matter how much money is spent on them, can never reach EPC Band C. Landlords may have no alternative but to take them out of the rental market.

Of the remaining 920,000 that have the potential to reach EPC C, it is unclear how many will pay several thousand pounds to upgrade and how many will sell. Those who upgrade will look to recover heir costs through higher rents. For each one who sells, the rental stock diminishes.

In the unlikely event that all landlords pay for the upgrades, there still remains the 478,000 that cannot be rented.

It may be that these properties will have to be exempted but CBRE's conclusion is clear. There will be a significant reduction in stock and rents will go up.