A leading lettings agent says the government’s EPC reforms are just another reason why investors probably won’t choose buy to let.
The director of Benham and Reeves, Marc von Grundherr, comments: “Since taking power, our new Government has launched a range of initiatives designed to win the vote of the average tenant without much thought for the wider rental market and plans to make EPC requirements of a C mandatory are yet another example of this.
“Insisting that landlords make such a sizeable investment into the energy efficiency of their property for what is, let’s face it, a very marginal improvement, is only likely to act as another deterrent to investors.”
He says his agency’s research suggests it is going to take the average landlord more than 26 years to recoup the costs of upgrading a sub-C EPC rated property in line with government plans.
The government has stated its plan to demand EPC-C ratings for all private rental properties but 2030.
The average cost of upgrading a buy-to-let property to an EPC rating of C or above in England is £7,396. This improvement is expected to create an energy bill saving of £280 per year with energy prices as they are right now. As such, it will take the average landlord a total of 26.4 years to recoup the cost of their EPC upgrade with the money they save on their energy bills.
Landlords in London are facing the longest wait to benefit from their EPC upgrade investment.
The average cost of upgrading to a C or above in the capital is £7,807 and the expected annual energy bill saving is £247. This means it will take 31.7 years to recoup the investment.
Across the central London rental market in particular, a great deal of stock is formed of Grade II listed buildings, with features such as single sash windows and brick walls which don’t provide landlords with much scope when it comes to improving the energy efficiency of their property.
Landlords in the East Midlands are looking at an average timeline of 30.8 years, followed by the North East (29.8), East of England (27.0), North West (26.9), South East (25.3), Yorkshire & Humber (25.3), and West Midlands (24.2).
Even in the South West where the energy bill savings that result from upgrading to an EPC of C or above are stronger than any other region (£365/year), because of one of the nation’s highest average upgrade costs of £8,201 per property, it still takes an average of 22.5 years to recoup the cost.
Von Grundherr continues: “Current plans provide no guarantee that carrying out any work will actually improve an EPC score and when you also consider the lack of tradespeople and the high prices they’re commanding as a result, it’s no wonder many landlords may think twice about their future within the sector. Those who do remain will inevitably have to pass any cost incurred in meeting an EPC C rating onto the tenant in the form of higher rent, further exacerbating the current issue of rental market affordability.”
