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Three-quarters of landlords shun homes with EPC ratings below C   

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Almost three-quarters of landlords say they are unlikely to buy a property that has an energy performance certificate rating of less than C, according to Foundation Home Loans data.

It found that 71% of buy-to-let owners say they were increasingly unlikely to buy a rental property if it wasn’t already at a C level — which is likely to be the future minimum standard.

Under current government proposals, landlords would need to bring their rental homes up to an energy performance certificate C rating by 2025 for new lets, and by 2028 for all other rental properties.

However, in July housing secretary Michael Gove said this deadline might be pushed out to 2028 for all lets to ease landlord concerns on funding these upgrades.

The more properties a landlord has in their portfolio, the less likely they were to buy below C, says the second quarter survey from the specialist lender.

It found that 74% of property investors with six to 10 and 11-19 properties are unlikely to buy below the C standard.

This rises to 78% of landlords with over 20 properties. Only 18% of BTL owners said an energy performance certificate rating would make no difference.

The average landlord has 3.3 properties rated at energy performance certificate D or below, rising to 9.5 for landlords with more than 11 properties.

In terms of the work landlords intend to carry out on below-level C properties, 37% said they would carry out the works at the minimum cost required to comply, while 20% said they would carry out works to maximise the long-term value of their property. However, a quarter said they would not carry out any work and would either sell the property, or not re-let it.

BTL owners estimate it will cost just over £10,000 per property to carry out the works required to hit energy performance certificate Level C, rising to over £11,500 for those with larger portfolios.

The study found that 57% of landlords said they would fund the works through savings (down from 76%, last quarter), 33% said they would raise rents (up from 26%), 18% would access government grants or funding (previously 19%), while 19% said they would either take a further advance from their lender or take out a loan (down from 20%).

Foundation Home Loans director of sales Grant Hendry says “While we still might be waiting for certainty and clarity over when the government is likely to introduce its minimum energy performance certificate level legislation for the private rental sector, it’s clear from this research that landlords are aware of what is likely to be coming, and are thinking seriously about their existing portfolios, how they might fund improvements, and what their plans might be when this is introduced.

“With landlords anticipating a cost of over £10,000 per property in order to improve its energy performance certificate Level to C, it is perhaps not surprising they are disinclined to buy properties already below this. In effect, they are future-proofing their portfolios by opting only to buy C and above properties now, while they will presumably focus on those properties within their portfolio which are not currently at this level.”

Foundation Home Loans’ survey was compiled using 983 online interviews with landlords over the first three weeks in July and was carried out by data group BVA BDRC.

Original Article

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