Energy crisis driving efficiency improvements in rental sector

• Half of landlords make efficiency improvements in the last six months as renters much less likely to consider inefficient properties with low EPC ratings
• Significant concerns remain – nearly two-thirds of landlords warn they could sell their properties in the next five years because of the added burden of improvements
• The findings are part of Confronting the EPC Challenge: The Path to a Sustainable Rental Market – Shawbrook’s second white paper on energy performance

Nearly three-in-five (58%) of renters say they would be less likely to consider a property with an energy rating of D or below – prompting more than half (54%) of landlords to make efficiency improvements in the last six months. Nearly two-thirds (63%) have brought forward upgrades because of sharp inflationary pressures.

The findings – drawing on views from tenants, landlords and mortgage brokers – are part of Shawbrook’s second creative and practical report on efforts to improve energy efficiency in the UK’s rented sector, which continue to be influenced by the government’s proposed changes to energy performance certificate (EPC) requirements.

Although the plans have not yet been put into law, ministers have previously indicated that newly rented properties in England and Wales will have to meet a minimum EPC standard of C by April 2025 – tougher than the current E standard. The measure could also apply to existing tenancies from 2028.

Despite the possible regulatory changes, Shawbrook’s research shows that a significant knowledge gap remains. While eight-in-ten (78%) landlords say they have now heard about the 2025 proposals, more than a third know only ‘a bit’ about the plans. Three-quarters (75%) of mortgage brokers are concerned their buy-to-let clients don’t know enough.

There are concerns that many could exit the market, with significant effects on the availability of properties. Nearly two-thirds of landlords say they could sell their properties in the next five years because of the burden of EPCs. Nearly two-in-five brokers with buy-to-let clients have seen them exit the market rather than make energy efficiency improvements.

Shawbrook recently announced an energy efficiency discount for new buy-to-let mortgage customers of up to 60bps on their arrangement fee for properties with an EPC rating of A, B or C. For new mortgages on properties where the EPC rating improves to at least a C during the term with Shawbrook, customers can apply for a partial refund of their arrangement fee, plus the cost of the new certificate (up to £100).  

Shawbrook also has plans to roll out further support for landlords needing to make improvements to their properties in the coming months as part of its commitment to support them on their journey to becoming more energy efficient.   

Emma Cox, Managing Director of Real Estate at Shawbrook, said:

“We know that many landlords are facing a difficult time because of the economic headwinds in the UK. It is therefore important that the sector provides all the support possible to help them meet sustainability goals and be ready for future regulatory changes.

“As well as the need for clarity from the government about its plans, the industry has a significant role to play in supporting landlords. Only by working together can we safeguard the future of the private rented sector.

“As a specialist lender, Shawbrook has been developing finance discounts to help landlords improve their properties – rewarding those with properties that are up to standard and incentivising those who need to make upgrades.

“Shawbrook is committed to building on the findings of this research in order to develop solutions that drive the sector forward. In the coming weeks, we are looking forward to bringing together key industry voices at a roundtable event to continue this important conversation.”

Chris Norris, Policy Director at the National Residential Landlord Association, said:

“The efficiency of our housing stock needs to improve but the challenge for the private rented sector is two-fold.

“On the one hand, there is the matter of the split incentive, where landlords are necessarily required to pay for the works but see little or none of the benefit. On the other, there is the net cost of the works required, which is substantial to say the least.  

“The investment required in our housing stock represents a potential burden for many landlords that they are highly unlikely to be able to shoulder alone, without significant changes to the tax system and some form of financial assistance along the way.”