Specialist buy to let lender Paragon Bank is calling for a phased introduction of minimum energy standards for private rented properties to limit disruption to a rental sector.

It says this would limit worsening a sector already suffering an acute imbalance between supply and demand, and minimise tenant harm.

In response to the government’s official consultation on energy performance targets for privately rented homes, Paragon is calling on government to abandon its 2030 target of a minimum Energy Performance Certificate of C for rental properties in favour of a phased approach, consisting of:

• 2030 for new tenancies;
• 2033 for extended tenancies;
• 2035 for all tenancies.

The Department for Energy Security and Net Zero has proposed implementation dates of 2028 for new tenancies and 2030 for all tenancies. 

Paragon argues that this timeframe is too short and could lead to landlords exiting the sector, moving the issue of upgrading property to EPC C to other tenures and causing harm to tenants by reducing the stock of rental homes. It also argues that there is insufficient capacity in the retrofit supply chain and labour force, particularly with the government’s competing objective of building 1.5 million new homes over the parliament.

Approximately 60% of properties in the private rental sector across England and Wales are currently at EPC D or below, and 1.6m properties would need to be upgraded annually to meet the 2030 target. 

This equates to retrofitting around 2,000 properties in the PRS per day per day to meet the 2030 deadline, or 4,000 to hit the 2028 deadline.

Paragon research of nearly 900 landlords, conducted by Pegasus Insights, found that only 17% of believe 2030 to be a reasonable deadline for completing EPC works. Additionally, nearly three quarters (73%) of landlords report tenant demand to remain strong, while Zoopla’s latest rental report found that tenant demand is 79% above pre-pandemic levels, with available stock 22% lower.

Louisa Sedgwick, Paragon Bank managing director of mortgages, says: “We support the Government’s Net Zero target and understand the need for strengthening policy and regulation to drive climate action, but we would strongly urge that a longer term and more balanced approach is taken to allow the retrofit supply chain to grow.

“Increasing the delivery timeline and maintaining flexible exemptions allows for a smoother transition to EPC A-C in the PRS, without exacerbating the demand and supply imbalance, which is already expected to grow due to forecast population growth and demographic changes.”

Additionally, Paragon advocates the following measures in its consultation submission to support landlords to transition the PRS to minimum EPC C:

• Revert to the original proposal for maximum investment cap of £10,000 and a seven-year exemption
• Introduce a range of financial measures, such as the Warm Homes Grant, to incentivise landlords to invest in their properties
• Ensure EPC reform is harmonised with the Energy Performance of Buildings regime
• Implement a complementary skills and training programme to address the retrofit and construction industry skills shortage
• Consider the regional discrepancies in energy-efficient properties, with the North and Midlands having a larger proportion of properties below EPC C compared to the South. This could lead to increased costs and disruption in these regions

Sedgwick concludes: “Rushed legislation could cause significant disruption to a PRS that will already be adapting to the new Renter’s Right Bill, forcing some landlords to sell because they cannot complete works in time. Adopting a more considered and realistic timeframe will give landlords more capacity to adapt their properties, allow the retrofit supply chain and labour force to grow and, ultimately, will be more beneficial for tenants.”