Energy Performance Certificates (or EPCs) have, until now, been barely significant when it comes to the London housing market. But it’s important to be aware that there are big changes afoot with regard to EPC requirements, and landlords in London need to pay close attention.

So, what changes are coming to the EPC requirements?

What kind of impact will those changes have?

Here, we take a closer look at the facts.

What Are EPCs?

The EPC or Energy Performance Certificate is a building’s official energy efficiency rating. The ratings range from A – the best – down to G – least efficient.

All properties listed on the market must have their EPC included within the sale particulars. Furthermore, all tenants need to receive their rental home’s EPC on moving into the property.

An Old Housing Problem

In London, there are many different house types, and some of them are very old. These period homes often have poor insulation. Stone cottages, for example, have no room at all for any cavity wall insulation to be installed, while houses with unconverted lofts often suffer from poor roof lagging.

For this reason, it’s been estimated that around 60% of all homes in the UK currently have a low EPC rating between D and G. In contrast, though, most modern homes have an EPC rating of A, B, or C.

The Reason Why Energy Performance Certificates Are Becoming Increasingly Important

EPCs are becoming more important for two different reasons:

• In 2022, electricity and gas prices are going to go up as the cap that the government put on the amount that energy suppliers could charge has been lifted. The result is going to be enormous increases in utility bills. Therefore, energy efficient homes that have excellent insulation will be in higher demand, since less fuel will be required to heat them and thus energy bills will be lower.
• It’s likely that new legislation will require everybody owning a property, whether a landlord or owner-occupier, to create an energy-efficient home with the aim of helping the UK government meet their emissions targets to combat climate change.

Already, the possibility of this new legislation is having an impact on the London market.

Deadlines And Targets To Improve EPCs

There’s an obvious incentive for owner-occupiers to improve their home’s energy efficiency. After all, a property that has an excellent EPC rating is going to be more attractive to prospective buyers. Younger home buyers will be more attentive to EPCs when compared with older purchasers.

It has been suggested that eventually, taxes such as stamp duty will be linked with EPC ratings, meaning that better EPCs will result in lower amounts of stamp duty to pay and, (at least in theory), a faster home sale.

For landlords in London, these are tough and specific targets.

Currently, a rental property must have a minimum of an E-rating on its EPC. But for all new tenancies beginning in 2025, the government is keen to change this to a minimum rating of C. It is also eager to introduce a minimum C rating across all rental homes by 2028, even for those that have long-standing tenants.

Further, although it hasn’t been confirmed yet, from 2030, a rental property’s minimum Energy Performance Certificate rating looks set to rise to a B.

Will There Be Any Exemptions?

Although there are a few exemptions, there aren’t many.

Listed buildings and buildings that have restricted covenants that would have their appearance unacceptably altered by energy efficiency improvements are the obvious exemptions.

Also, some temporary properties, and those used for under 4 months per year, are exempt too.

For landlords in London unable to improve their property to its required minimum Energy Performance Certificate rating, a £3500 rental cost cap has been put in place. This allows them to make the necessary improvements to that amount, then register their exemption as “all improvements made.”

The Impact On The Market

It has recently been reported by Rightmove that those sellers who improved their EPC from a G, F, E, or D rating to a C, received as much as 16% more on the sale price of their property.

Trade bodies representing the rental sector have reported, though, that some landlords have already taken the decision to sell up since they’re afraid of being unable to afford to make the required improvements, particularly on older homes, and particularly if the cost cap of £3500 is increased.

Everybody wants to do their bit to reduce global warming, however, it’s essential to avoid making such strict targets that owners struggle to afford them or find them too disruptive. Fewer properties may, as a result, be available for renters as an unintended consequence, and some flats and houses that are owner-occupied may become challenging to sell.

It’s possible that there will be some softening of the targets, but regardless, energy is going to be an ever-larger factor this year in the housing market, and for the foreseeable future.

Cribs Estates Ltd are your local property experts for the London area. Call us on 0203 441 1571 or email info@cribsestates.co.uk to find out more.