Government Funding Should be Offered to Help Rental Sector Achieve EPC Target

The UK government's 2025 EPC target for the residential rental sector remains in place.

However, a lack of financial support for landlords who must upgrade the energy efficiency of their rental investment property to an EPC rating of C or above is also affecting tenants whose energy bills are higher as a result. With data showing that a third of the private rental housing stock was built before 1919 - the most expensive to upgrade from an energy perspective - the costs of required energy upgrades can be high and unlikely to be recouped in a timely manner through rental income.

However, there are ways to encourage more investment. If the government were to create a funding scheme or a different way to encourage landlords and private rental sector (PRS) property investors to go ahead with energy improvements sooner rather than later, this would provide a number of benefits for landlords, tenants and the broader economy.

PRS Households Receive Least Energy Efficiency Support

Research shows that just 5% of households in the PRS have received any financial support from the government in relation to improving the energy efficiency of their homes. That’s even though the proportion of tenants living in fuel poverty (where a household can’t afford to keep their home adequately heated) is higher in private rental homes than those in social rental properties. In comparison, more people living in other types of homes received energy efficiency improvement funding:

• 21% of home-owner occupiers.
• 12% of households living in council-owned properties.
• 11% of those living in housing association homes.

Figures show that some 62% of PRS homes have an EPC rating of D or lower which is why 37% of everyone living in fuel poverty resides in the PRS – with just 23% living in social sector lettings experiencing the same problem. Despite this, government financial support for the average of £4,500 it is calculated to cost to sustainably lift a PRS property from an EPC rating of D or lower to a C rating or higher, remains scarce.

Financial Incentives Could Help 

The National Residential Landlords Association (NRLA) are calling for a ‘bespoke financial package’ to help support the PRS make the required energy efficiency changes in the next four years. This would be in line with the government’s ambitions to reach its target across the country’s rental sector by 2025.

The introduction of a window scrappage scheme – similar to the boiler and car schemes that met with much success in previous years – could encourage more owners of PRS properties to upgrade their windows, which would go a long way to lifting the EPC rating of their property.

Another option would be where landlords do carry out any energy efficiency improvements, the costs of that could be offset against tax through repair and maintenance instead of as an improvement at the point of sale against Capital Gains Tax.

“We all want to see energy efficient rental homes. They cut bills for tenants, make homes more attractive to potential renters and help the country to achieve its net zero commitment,” said chief executive of the NRLA, Ben Cheadle. 

“The Chancellor needs to develop a financial support package that works for landlords and tenants. This should especially be targeted at the hardest to treat properties where the cost of work will be prohibitive for landlords. In this way, he will also be doing the most to help the fuel poor,” he added.

With that 2025 EPC rating target moving ever closer, if the government were to introduce financial support incentives for the PRS then it would provide benefits for all involved, including the broader economy. That’s something that should be welcome at a time when the country is still recovering from the devastating effects of the coronavirus pandemic.