OPINION: Why the EPC rating system needs fixing

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The government’s controversial policy of phasing out natural gas boilers in favour of heat pumps, in its drive to meet internationally agreed energy efficiency targets, could be stymied because of an out of date EPC algorithm.

Regardless of the fact that many older poorly insulated properties would be unsuited to heat pumps, fitting one with the current method of calculating a property’s energy efficiency rating could mean that a property with an EPC rating of C would be pushed to a D.

Currently there are some rather bizarre outcomes to the EPC system that need to be tackled if the above targets are to hold any credence with property owners and energy specialists and the Government have acknowledged this.

Heat pumps use more electricity

The problem is that heat pumps use electricity which is more expensive than natural gas. The same goes for a property heated by LPG (Liquefied Petroleum Gas) which as a gas is more expensive than mains gas. The EPC system currently incentivises the use of mains gas over electricity or LPG on a cost basis.

Tom Spurrier, of the UK Green Building Council, a leading industry body, has said:

“We have currently got a metric that incentivises gas because it is cheaper.” If you install a heat pump, which is powered by electricity, your EPC rating may actually fall. Properties with Liquid Petroleum Gas (LPG) are also marked down because the gas is more expensive than mains gas.

One Whitehall source told The Daily Telegraph: “We are aware of this problem and it is being reviewed.”

The Conservative MP Craig Mackinlay, the chairman of the Net Zero Scrutiny group, said:

“Given that heat pumps can actually increase energy use, on which EPC certification is derived, they could push a property that might have been rated C under an old method into D. That could make it both unrentable and possibly even unsaleable, if some of the more nonsensical Net Zero measures that we hear about are realised.”

Headlong drive to net zero

Cabinet ministers have expressed concerns about the speed the Government is going with its transition to net zero. Households and businesses a concerned about the costs this will introduce at a time when gas shortages are resulting in record energy price increases – it could be the biggest cost-of-living squeeze in a generation.

Energy Performance Certificates (EPC) grades are likely to mandated at a minimum of “C” for rental properties in the near future from the present grade “E” and the rating is increasingly being tied to property prices and mortgage approvals.

Property values influenced by EPC ratings

Research by the price comparison website Moneysupermarket shows that by improving a property’s energy rating from G to A can increase its value by as much as 14 per cent.

The way that the ratings are currently estimated, based on a formula arrived at in 2012, means that by moving away from natural gas to so called “energy efficient systems” could result in properties becoming unsaleable and unlettable.

Currently the EPC calculations estimate what it costs to heat a home, rather than the carbon emissions a heating system produces. Heat pumps whether air source or ground source produce less CO2 than a gas boiler, but they are not necessarily recorded cheaper to run.

A ground source heat pump, which is more efficient than an air source system, can cost up to £25,000 and is currently the only mainstream alternative to a gas boiler, though the Government is experimenting with switching natural gas boilers to burn hydrogen.

Few alternatives to natural gas

Rishi Sunak, the Chancellor, and Kwasi Kwarteng, the Business Secretary, have both pushed back on a headlong dive into renewable sources and heat pump conversions, arguing that the UK should continue to rely on natural gas production as the country moves towards net zero with the 2050 target.

The EPC system was drawn up in 2007 as a way of nudging property owners into making their houses more efficient. It has become increasingly important over time, with lenders such as Natwest now offering so-called green mortgages with cheaper rates for properties graded A or B.

Not fit for purpose

Nicholas Mendes, the mortgage technical manager at John Charcol, has said that the current EPC system is “not fit for purpose” as the green ratings have now became crucial in lenders’ mortgage calculations:

“Having an A, B, or C EPC rating will no longer be a unique selling point, but the expectation. Whether you’re purchasing or remortgaging, be prepared, as we could see the best rates be for green mortgages in the future,” Mr Mendes says.

A Government spokesman for the Business Department told The Daily Telegraph:

“Energy Performance Certificates provide useful guidance for consumers and businesses outlining how energy efficient buildings are in a simple and comparable manner.

“We are already looking at ways the system can be improved through our EPC Action Plan to ensure they are as accurate and effective as possible.”

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Government acknowledges the EPC rating system needs fixing

admin    Uncategorized     agents

The government’s controversial policy of phasing out natural gas boilers in favour of heat pumps, in its drive to meet internationally agreed energy efficiency targets, could be stymied because of an out of date EPC algorithm.

Regardless of the fact that many older poorly insulated properties would be unsuited to heat pumps, fitting one with the current method of calculating a property’s energy efficiency rating could mean that a property with an EPC rating of C would be pushed to a D.

Currently there are some rather bizarre outcomes to the EPC system that need to be tackled if the above targets are to hold any credence with property owners and energy specialists and the Government have acknowledged this.

Heat pumps use more electricity

The problem is that heat pumps use electricity which is more expensive than natural gas. The same goes for a property heated by LPG (Liquefied Petroleum Gas) which as a gas is more expensive than mains gas. The EPC system currently incentivises the use of mains gas over electricity or LPG on a cost basis.

Tom Spurrier, of the UK Green Building Council, a leading industry body, has said:

“We have currently got a metric that incentivises gas because it is cheaper.” If you install a heat pump, which is powered by electricity, your EPC rating may actually fall. Properties with Liquid Petroleum Gas (LPG) are also marked down because the gas is more expensive than mains gas.

One Whitehall source told The Daily Telegraph: “We are aware of this problem and it is being reviewed.”

The Conservative MP Craig Mackinlay, the chairman of the Net Zero Scrutiny group, said:

“Given that heat pumps can actually increase energy use, on which EPC certification is derived, they could push a property that might have been rated C under an old method into D. That could make it both unrentable and possibly even unsaleable, if some of the more nonsensical Net Zero measures that we hear about are realised.”

Headlong drive to net zero

Cabinet ministers have expressed concerns about the speed the Government is going with its transition to net zero. Households and businesses a concerned about the costs this will introduce at a time when gas shortages are resulting in record energy price increases – it could be the biggest cost-of-living squeeze in a generation.

Energy Performance Certificates (EPC) grades are likely to mandated at a minimum of “C” for rental properties in the near future from the present grade “E” and the rating is increasingly being tied to property prices and mortgage approvals.

Property values influenced by EPC ratings

Research by the price comparison website Moneysupermarket shows that by improving a property’s energy rating from G to A can increase its value by as much as 14 per cent.

The way that the ratings are currently estimated, based on a formula arrived at in 2012, means that by moving away from natural gas to so called “energy efficient systems” could result in properties becoming unsaleable and unlettable.

Currently the EPC calculations estimate what it costs to heat a home, rather than the carbon emissions a heating system produces. Heat pumps whether air source or ground source produce less CO2 than a gas boiler, but they are not necessarily recorded cheaper to run.

A ground source heat pump, which is more efficient than an air source system, can cost up to £25,000 and is currently the only mainstream alternative to a gas boiler, though the Government is experimenting with switching natural gas boilers to burn hydrogen.

Few alternatives to natural gas

Rishi Sunak, the Chancellor, and Kwasi Kwarteng, the Business Secretary, have both pushed back on a headlong dive into renewable sources and heat pump conversions, arguing that the UK should continue to rely on natural gas production as the country moves towards net zero with the 2050 target.

The EPC system was drawn up in 2007 as a way of nudging property owners into making their houses more efficient. It has become increasingly important over time, with lenders such as Natwest now offering so-called green mortgages with cheaper rates for properties graded A or B.

Not fit for purpose

Nicholas Mendes, the mortgage technical manager at John Charcol, has said that the current EPC system is “not fit for purpose” as the green ratings have now became crucial in lenders’ mortgage calculations:

“Having an A, B, or C EPC rating will no longer be a unique selling point, but the expectation. Whether you’re purchasing or remortgaging, be prepared, as we could see the best rates be for green mortgages in the future,” Mr Mendes says.

A Government spokesman for the Business Department told The Daily Telegraph:

“Energy Performance Certificates provide useful guidance for consumers and businesses outlining how energy efficient buildings are in a simple and comparable manner.

“We are already looking at ways the system can be improved through our EPC Action Plan to ensure they are as accurate and effective as possible.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Government acknowledges the EPC rating system needs fixing | LandlordZONE.

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AIRBNB: Westminster to step-up war against ‘nuisance’ short-term lets landlords

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Westminster Council has launched a spirited campaign to stop central London being overrun by nuisance short-term lets booked chiefly through Airbnb.

It is lobbying the government to follow Paris and Amsterdam’s lead whose authorities have clamped down on problem properties.

Westminster wants the power to fine owners whose lets create anti-social behaviour and to introduce exemptions for high impact areas which can’t cope with such high numbers.

The council says short-term letting occurs on an industrial scale in the city where more than 13,000 properties are available on sites such as Airbnb but also Booking.com.

2,000 breaches

Almost one in three of its residents in the West End complain that irresponsible short-term letting is a problem in the area and its team is currently investigating 2,000 breaches of short-term let rules.

Ahead of proposed renting reforms mentioned in the government’s Levelling Up White Paper which are likely to include a national landlord register, Westminster wants short-term letting companies to introduce registration schemes.

Council leader Rachael Robathan (pictured) says that while some properties are let responsibly, many are not and these result in noise, illegal dumping, antisocial behaviour and sometimes criminal activity.

She adds: “Many short-term let properties are causing a strain on council resources and making life hell for many of our residents who constantly complain to us about the detrimental effect they are having.

“We need more restrictions and powers given to us as a local authority to tackle short-term letting anti-social behaviour impacting our communities.”

Westminster Council is already tough on the PRS and operates a Housing Standards Taskforce and an online rent repayment checker for tenants to check if their HMO is licenced and to help them claim back rent.

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BREAKING: Rental sector ‘boom’ drives tenancy voids to five-year low

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Landlords are experiencing their lowest void periods for the last five years, after peaking at 39% during the third quarter of 2020.

Levels have steadily dropped during the last 18 months and now just 25% have had empty rental properties during the previous three months, according to Paragon Bank’s latest research.

Its survey of 800 landlords, undertaken by BVA BDRC, found that this fall was driven by a reduction in those with six or more properties who had one of their rental properties vacant.

Paragon says landlords in Wales had the largest number of recent void periods, with 39% facing at least one empty let, compared with the South West and East of England where only 23% of landlords reported voids.

Turnaround

Central London has seen the greatest turnaround – further evidence of the capital’s rental market resurgence.

In Q3 2020, 68% of central London landlords recorded a void period, the highest proportion of any region, which has now fallen to just 24%.

Mortgages MD Richard Rowntree says that with sustained strong tenant demand and the constrained supply seen in both the rental and home-buying markets, it’s no great surprise that void periods have reached a five-year low.

“This reinforces our belief that policy designed to support homeownership, which we support, should be carefully considered so as not to be at the detriment of a private rented sector that is evidently as important now as it’s ever been,” he adds.

“Put simply, we need more homes and achieving this will require an approach that sees all tenures viewed as solutions, with each catering to a diverse mix of people at different stages of their lives.”

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RENTS: Annual inflation hits 8.5% as tenants fight over fewer properties

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The average rent in the UK increased by 0.4% during January to £1,064 per tenancy, or £897 if London’s sky-high rents are omitted, the UK’s most comprehensive rental index has revealed.

HomeLet, which uses data from some 5,000 participating letting agents and a million references each year, says while UK rents are increasing by 8.5% a year, London’s are 12.6% higher year-on-year.

Also, eight of the UK’s 12 regions and countries (see table below) saw rent increases last month, although annual increases remain strong across all of them on a yearly basis with rises strongest in the NW, Scotland, Northern Ireland and the SW.

The figures starkly reveal the current problems facing the private rented sector – the government’s energetic effort to batter landlords on a number of tax and regulatory fronts are leading to less stock while many tenants are staying put as they put off buying their first home.

“As expected, 2022 has started as 2021 ended, with an imbalance between supply and demand, and inevitably that has brought on price rises, that will likely continue in the coming months,” says Andy Halstead, HomeLet & Let Alliance’s CEO (pictured, below).

“There are some caveats, though. Though we have seen another record high rental price this month, we must consider inflation rates, a topic that has been discussed heavily in the past couple of weeks.

“Based on the latest inflation figures, the month-on-month rent increases have been lower than the wider inflation rate, indicating a level of steady growth. 

“The private rental sector has played a key role in the UK throughout the pandemic, and we hope that the government will make things easier for landlords in 2022, to allow them to continue playing a key role in the coming months and years.” 

Figures in full

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LATEST: Homes now worth £24,500 more than a year ago, on average

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Price growth slowed to +0.3% in January – the lowest rise since last summer – although it was enough to push the average house price to a record high of £276,759.

The Halifax House Price Index reveals that the annual rate of growth remains steady at 9.7%, putting overall prices about £24,500 up on this time last year, and £37,500 higher than two years ago.

The lender also reports that transaction volumes are returning to more normal levels.

Wales was by far the strongest performing nation, with annual house price inflation of 13.9%, where the average house price fell slightly to £205,253. In England, the North West was again the strongest performing region, up 12% year-on-year, with an average house price of £213,200.

Although London remains the weakest performing area, annual house price inflation increased for a third straight month to 4.5% – its strongest performance in more than a year.

Deposit pressure

Halifax warns that the pressure on deposit requirements will become more acute in the short-term as household budgets face even greater pressure from an increase in the cost of living and rises in interest rates begin to feed through to mortgage rates.

Twindig CEO Anthony Codling agrees and says: “Deposits will be key to the level of house price inflation this year. Those with a big deposit will be able to rise above the living and mortgage cost rises, those without will not and unfortunately, the deposit poor will also find it harder to save as living costs rise.”

Property portal OnTheMarket.com CEO Jason Tebb adds that it’s not clear whether last week’s interest rate rise will impact buyer confidence, particularly given greater pressure on budgets from an increase in the cost of living.

He says: “With mortgage rates still comparatively cheap and many on fixed-rate products, positive sentiment should prevail for now although it’s possible that the growth in average prices may continue to slow over the next few months.” 

Tom Bill, head of UK residential research at Knight Frank, believes supply will pick up as more owners decide now is the time to act.

“A number of prospective sellers had hesitated due to the distortive effect of a stamp duty holiday and a global pandemic,” he says.

“This year could see high demand more evenly matched by supply, which would mean UK house price growth ends 2022 in single-digits.”

Read more house price news.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Homes now worth £24,500 more than a year ago, on average | LandlordZONE.

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House Price inflation slows in January

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The latest Halifax House Price reported growth slowing in January to 0.3%, the lowest inflation figure since June last year, but average prices still hit a new record high of £276,759.

The annual rate of growth still remains high at 9.7% with transaction volumes returning towards pre-Covid levels.

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Being an expert after an expert is employed?

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You have an EICR done by a NAPIT registered professional – it raises a few C’3. The report actually states ‘ There are no items adversely affecting electrical safety, and the C’s listed are categorised and listed as ‘Improvement recommended’.

View Full Article: Being an expert after an expert is employed?