EPC ratings: how landlords can make properties more energy efficient

The UK Government is proposing new regulations that would mean landlords have to improve their EPC rating to at least a C for new tenancies. We reveal what energy efficiency improvements are available, the impact on an EPC rating and the potential costs.

New proposals to make homes more energy efficient

There are a number of regulatory proposals weighing on landlords’ minds, but the plan to require all privately rented properties to have an energy performance certificate (EPC) rating of at least C is one of the most significant changes on the horizon.

The UK Government has suggested that by 2025 all rental properties must have an EPC of at least C for new tenancies, with landlords who keep existing tenants in place having until 2028 to upgrade.

The changes are not yet set in stone and the Government is yet to formally respond to its consultation on the subject, which closed in January 2021.

But with an increasing focus on climate change, most expect the changes will come into force, at least at some point and in some form.

For some landlords, the cost of meeting this new standard will be high. At present, rented properties need to have an EPC of at least E, but landlords can get an exception if the cost is ‘unaffordable.’

The threshold for ‘unaffordable’ is currently £3,500, but the Government has proposed this should be raised to £10,000 once properties are required to get to an EPC rating of C.

Andrew Parkin, chair of the Property Energy Professionals Association, a trade body that represents energy assessors, says this reflects the fact it becomes more costly to move bands as you move higher up the EPC ratings.

“When you are at the lower ratings, there will be things that you can do that will make that initial jump to E fairly easy,” he explains.

“To get from a lower rating to a C is a big jump.”

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Energy efficiency upgrades to cost up to £6,155

In its consultation, the Government estimated the average cost for a landlord to get a property to an EPC rating of C would be £4,700. But analysis by mortgage broker Habito put the average cost of upgrading a property at up to £6,155, and that was just to get from a D to a C rating.

The high costs are understandably causing concern among landlords, particularly given the tax implications.

“A lot of costs landlords will incur in improving their EPC rating may well fall under the capital category because installing something like cavity wall insulation would be considered an improvement rather than a repair,” says Michael Wright, director at property accountancy firm RITA 4 Rent.

“This means it cannot be offset against rental income, but instead retained for future use against a potential capital gain.”

Is it time for landlords to sell?

The end result is that some landlords are preparing to sell up rather than carry out the necessary improvements.

According to a survey of 600 landlords carried out by buy-to-let lender The Mortgage Works in September 2021, more than half of landlords with properties rated D or lower were considering offloading their properties.

If you have a property that is likely to appeal to owner-occupiers, this might be a viable option.

So far, the Government has proposed owner-occupiers will not need to get their homes up to an EPC rating of C until 2035, so the issue may be of less concern to those buyers.

But if your property is more likely to appeal to other landlords, it might be tougher to sell as many landlords are already wary of buying properties not already rated at least C.

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Should you wait until the regulations are set in stone?

If you’re not keen on selling, you’re likely to be wondering if you should do something to prepare now, especially if you have a tenant leaving or your fixed mortgage deal is up for renewal – with costs so high it might make sense to release equity to fund improvements.

On the other hand, some landlords are holding off until the regulations are formally announced, hoping either that they will be watered down or there will be some financial incentives to help with the cost.

Indeed, when the Government consultation was released in September 2020 it said that landlords would benefit from the Green Homes Grant, the short-lived scheme that was launched in September 2020 only to be withdrawn in March 2021.

“The Green Homes voucher scheme was pulled before it had a chance to really have an impact,” comments Nigel Donohue, chief executive officer of the Insulation Assurance Authority.

“What it did was whet everybody’s appetite and of course, they are all looking for it now and there’s nothing there to help them.

“All there is, is a stick that says you are going to have to do this, or you won’t be able to rent the property.”

However, he’s not convinced it’s worth waiting for a handout.

“I think it is unlikely that there will be any financial assistance,” says Donohue.

“I think the way the Government could assist is by looking at the VAT. In some cases, there is 20% VAT; they could zero VAT it.”

In addition, Parkin points out that the methodology used for EPC calculations is set to change in the next year. While this won’t affect EPCs already issued, it will be used for new ones and some properties will score worse under the new framework than under the current scheme.

It’s also likely that if landlords are only given a year or 18 months to upgrade properties, there will be a shortage of professionals to carry out work as there will be higher demand than usual.

So, if your property is within reach of a C rating today, it may be worth investing now as once you’ve got that rating it is valid for 10 years.

Where to start with energy efficiency improvements

The starting point for any landlord should be their existing EPC. Assessors make recommendations on what measures could be introduced to a property, their likely cost and how they could affect its rating.

As a general rule, however, Donohue says: “The quick wins are always going to be things like loft and cavity insulation.

“These are probably the lowest cost options.”

Now we’ll run through all your options to improve the energy efficiency of your property, the potential costs and whether it's worth considering.

How to cut your energy bills

How much cavity wall insulation costs

If your property has cavity walls, meaning there are two walls with a gap in between, and there’s no insulation there, you could increase your EPC score by up to 15 points by putting some in.

Parkin says the biggest jump in EPC score will be for detached houses as these have four exposed walls, with semis and terraces benefitting to a slightly lesser degree.

“Cavity wall insulation is not that expensive,” comments Parkin.

“Most applications are about £1,000 and it will save that within about four or five years of being installed.”

Costs will obviously vary depending on the property size with tradesperson listing site Checkatrade estimating the cost of cavity wall insulation at £22-£26 per square metre.

If you don’t have cavity walls, and many older properties don’t, you would need to install solid wall insulation to get the same impact, and this is likely to cost between £10,000 and £15,000.

How much loft insulation costs

If your property has no loft insulation, you stand to benefit significantly from installing some and in most cases, you can have it professionally installed for less than £500.

“If you have got no or very little insulation in the loft, it is the first thing you can do,” says Parkin.

“It is the cheapest insulation there is, it is the easiest to install and it is the most cost-effective.

“It will pay you back within one year.”

According to energy advice saving community TheGreenAge, going from no loft insulation to the recommended 270mm could bump up your EPC score by 10-15 points.

If you already have some insulation, topping it up could get you up to five extra points.

How much double glazing costs

If your property only has single glazing, you’ll likely gain a few points by upgrading to double glazing, but the difference is not as significant as some window salespeople may have you believe.

Checkatrade puts the average cost of a uPVC double glazed window at £360, and it estimates the cost of supplying and fitting eight windows and two doors at £4,500.

The upside is that upgrading comes with a tax benefit.

“Double glazing is a bit of an oddity, in that even if this is replacing single glazed windows, it can be treated as a repair,” advises Wright.

Why you should wait for clarity before upgrading your heating system

Unless your property urgently needs a new heating system, this is one area where you might want to wait for further clarity, says Parkin.

“Hang fire and wait to see what the Government says,” he advises.

There’s some conflict between the current push to install carbon-friendly heating systems and the way these are rated on EPCs.

As EPCs measure fuel costs, properties with gas will always score better than those with electric and most carbon-friendly systems are electric. But as the Government has stated it plans to phase out gas boilers in homes, and given the recent rise in gas prices, it’s possible this could change in the future.

And even though grants are currently being handed out to incentivise those installing air source heat pumps and ground force heat pumps, Donohue says at present, an air source heat pump is more likely to make your EPC score worse than better.

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Low-cost ways to improve your EPC

There are a number of other low-cost ways to improve your EPC.

In isolation, they may not be enough to dramatically improve your rating, but if you’re only a few points from a C or you can combine a few of them, they could make all the difference.

For example, changing old light bulbs with LEDs can give you a point or two, depending on what percentage of your property already has low energy lighting.

If you have a hot water cylinder that either doesn’t have an insulation jacket or has a loose jacket, you may also pick up a couple of points by improving this. You might also gain a point by installing a thermostat on it.

If it’s a dual cylinder tank, make sure your electricity is on a dual-rate meter (meaning overnight electricity is charged at a lower rate) as you could also gain points here.

For gas systems, if you make sure at least half the radiators have thermostat valves, you could also score a point or two.

The benefit you will get from any of the improvement measures will depend on your property size and type. So before spending large amounts of money, it’s worth talking to an energy assessor about your plans to see if what you’re thinking of doing will get you over the line or not.

If your existing EPC is quite old, you may find the recommendations given when it was carried out won’t still have the same impact because the methodology has changed.