Mar

Will you pass energy-efficient improvement costs onto your tenants as higher rent?

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Under proposed regulations, landlords may be required to make changes to their properties to improve their Energy Performance Certificate (EPC) ratings to C or above.

The anticipated deadline to comply with these regulations is 2025 for all new tenancies, and 2028 for all existing tenancies. But making the necessary energy-efficient improvements could be a costly exercise for many landlords, particularly those with older properties.

The landlords we surveyed estimated an average cost of £5,900 to achieve the required EPC rating however, this figure could be significantly underestimated.

Landlords who have already made the necessary improvements to their properties have spent £8,900 on average, but wider market forces such as labour costs and material shortages could push this up even further.

Pass on costs

Of the landlords we spoke to* over half said that they will pass at least some of these costs onto their tenants in a bid to recoup some of the money they will need to spend.

Tenants in London are most likely to see a rise in their rents as a result, with 68% of landlords in London saying they would share at least some of the costs with their tenants.

Whether landlords increase rents straight away or not, nearly a fifth (18%) of landlords expect them to rise as a natural consequence of the new regulations.

Finance options

While passing on some of the costs to tenants may be necessary, finding a cost-effective funding solution, such as bridging finance, might be worthwhile.

This funding could help landlords make the required changes ahead of the deadline, relieving some of the pressure, and could possibly offset the costs that tenants would otherwise see.

For landlords unaware of the level of works required, what the associated costs will be, or what finance options are available to them, speaking to a professional mortgage broker or lender sooner rather than later could help paint a clearer picture.

Read Shawbrook’s Confronting the EPC Challenge report

*Research Methodology

Shawbrook Bank contracted Opinium to undertake research between 18th and 25th November 2021 to understand landlords’ awareness of the upcoming proposed changes to the Energy Performance Certification (EPC), which will require properties to be rated ‘C’ or above by 2025 in order to begin a new tenancy. A total 1,000 UK landlords were surveyed.