There has been a lot of talk in the rental sphere lately of the ‘exodus of landlords from the BTR market’. While it cannot be ignored that landlords are now facing higher borrowing costs and less generous tax treatment, it’s not showing the entire picture.
What are the new regulations?
Some confusion has been driven primarily by changes to the required energy performance of new lettings. Since April 2020, the Energy Performance Certificate (EPC) requirement for new lettings has been E. From April 2025, any newly let property in the private rental sector will require an energy performance certificate of C or higher. By 2028, all rental properties will need to have reached the new minimum standard. All homeowners will likely be subject to the same regulations in the coming years in line with the government’s net zero strategy which aims to achieve the target of net-zero carbon emissions by 2050.
Understandably, the government wants homes to be as energy efficient as possible. It benefits both the environment and the pockets of landlords and owners long-term. But bringing properties up to minimum standards of energy efficiency can’t be done overnight and it will be expensive too. What can landlords do now to make sure they are making the changes needed to meet the requirements?
With the deadline 2 years away and the average EPC rating for a UK property currently at D, landlords have important decisions to make. Bringing a rental property house up to scratch can be time-consuming and expensive. Instead, some buy-to-let landlords are focusing their time and finances on investing in energy-efficient properties. Landlords could make the most of the EPC rating changes by selling their old stock to future-proof their investments.
Buy-to-let landlords that own a single property may consider making the required changes such as improved insulation, boiler upgrades or new windows, but if you have a substantial property portfolio that currently sits under the required EPC rating of C, it may be more beneficial to consider selling your properties to reinvest in new, more energy-efficient properties. According to analysis by Savills, the average D-rated property would need on average £12,746 spent to reach a C band, so the cost for landlords with large portfolios could be extortionate. Selling old stock and reinvesting in properties that meet the required C rating can be the most valuable way to rebalance your portfolio, manage your properties efficiently, and maximize your returns.
If you are considering selling your current properties to invest in more energy-efficient stock, we can guide you and show you our current developments in Birmingham and further afield.
It’s important to note that the legislation is facing some pushback. With the pandemic, rising energy bills, and increasing cost of living, minor changes or extensions to the legislation cannot be taken off the table. But the legislation is moving forward so landlords need to be ready for changes and evaluate their current position to understand the best next steps for them.
What are the possible implications for landlords who do not comply by 2025?
The legislation is clear that the responsibility to comply lies with the landlord and not the tenants. Therefore, it will be the landlord who is hit with fines and penalties from the local authority reaching up to £5,000.
Prosperity Wealth is here to support landlords. If you are concerned about the upcoming changes and would like to know more, please get in touch. We can offer support in finding the best energy-efficient developments and you can make your money work for you with our unique monthly payment plan.