We've written before about the effect tougher Energy Performance requirements might have on property investors owning older properties. Now someone has put a price on it. A cool £29 billion.
Last month, the Minimum Energy Performance of Buildings Bill passed its first reading. This is largely procedural but the Bill will head to the Commons for debate and second reading in October.
Homes are rated through an Energy Performance Certificate (EPC) on a scale of A to E. One of the main provisions in the Bill is that privately rented properties must achieve an EPC of C or above by 2025 in the case of new tenancies and 2028 for existing tenancies.
Geospatial technologists Kamma have published their analysis that 65% of privately rented homes - 2.9 million properties - are currently rated at D or below and that the average cost of the necessary upgrades will be circa £9,800 each. That's a grand total of £29 billion.
The Bill mentions the possibility of exemptions, but given the government's recent history of treating private sector landlords as soft targets, these may only improve the situation for a few.
The onus on owner occupiers is less harsh. "The Secretary of State must take reasonable steps to encourage owners of properties to which this section applies to improve the energy performance of their homes." Owner occupiers will have until 2035 to bring properties up to EPC level C where "practical, cost effective and affordable".
The bill itself is a hugely important step in the right direction: it’s right to target poorly performing housing stock at this crucial time in the fight against climate change. More consideration needs to be given, however, to who and how this is going to be paid for. An increase in minimum EPC from E to C is a dramatic rise and landlords won’t see any short-term benefits from lower fuel bills. Government policy is all stick and no carrot at this point.
Increasing awareness of the climate issue is certainly driving demand for more energy efficient homes. Knight Frank recently reported that environmental factors are closing the gap on open space and fast internet as priorities.
Existing landlords with old stock are faced with stark choices. Pay for the upgrades, sell up or leave properties empty.
Now more than ever is the time for new investors to consider future-proofing themselves by buying new.