Should landlords be worried about new rental regulations?

Should you and other landlords in Maghull, Crosby and the rest of Sefton be worried?

Everyone should be doing their bit to help reduce the UK’s carbon footprint on the globe – yet the question is, is that burden being put too much on the shoulders of landlords with potential bills of £7,600+ in the next four years?

The background - the UK has obligated itself to a legally binding target to be carbon neutral by 2050. One of the biggest producers of greenhouse gasses is residential homes.

To hit that carbon-neutral target (as one-fifth of the UK's carbon output comes from residential property), every UK home will need to achieve a minimum grade of ‘C’ on their Energy Performance Certificate (EPC) by 2035. Each EPC has a rating between ‘A’ and ‘G’ - 'A' being the best energy rating and 'G' the worst – like an energy rating on a fridge or washing machine.

All UK rental properties have required an EPC. Yet, from April 2020, the Minimum Energy Efficiency Standards (MEES) regulations have required all private rental properties (including rental renewals) to have a minimum EPC rating of ‘E’ or above.

Yet new legislation being discussed by the Government’s Climate Change Committee has suggested that landlords should play their part and increase the energy efficiency of their private rented homes. Sounds fair until you dive into the details.

The Government is mooting the idea that all new tenancies (i.e. when a new tenant moves in) in private rented properties should be at an EPC rating of 'C' or above by 2025 (and all existing tenancies by 2028). The issue is…

66.01% of all private rented properties in Sefton have an EPC rating of ‘D’ or below.

The problem is some local landlords will find it very expensive, neigh impossible, to improve the energy efficiency of their rented properties in Maghull, Lydiate, Waterloo and Crosby; especially those landlords who hold older housing stock such as terraced properties built in the 1800s in South Sefton. These Victorian terraced houses never perform well on EPC ratings as they tend to have solid walls.

Of course, you can improve the EPC rating of a terraced house by improving roof insulation, boiler replacement, solar heating, and high-grade uPVC windows. Yet, with some terraced houses, there will come the point where you will be unable to get to the haloed 'C' rating without installing external or internal wall insulation, sometimes even floor insulation.

With wall insulation costing between £5k and £15k and floor insulation around £5k…

The bill to improve all Sefton’s private rented properties will be a minimum of £60,210,840.

But before we look at what the options are for landlords in Maghull & the rest of Sefton, here’s the weird part of EPC’s. An EPC rating is calculated on the cost of running a property and not the carbon output or energy efficiency, despite its name.

You might want to think twice before rushing into making these changes though. The rule changes are only a discussion paper, and it remains open for consultation by any member of the British public until 30th December 2021. That means the Government's strategies and tactics may change.

Given that 57% of private rented properties are below a ‘C’ EPC grade, it is hard to believe the Government could achieve this without making big cash grants available.

For example, there is presently a cap of £3,500 for energy improvements that landlords have to spend to get it to the existing EPC ‘E’ target grade on private rented homes (i.e. if you have a privately rented home at an 'F' or 'G' EPC rating, you only need to spend a maximum of £3,500 as a landlord on improving your EPC rating and still being legal even if those £3,500 don't get you to the current 'E' rating minimum). So, if the current rules allow an exemption to the EPC renting rules, if a Maghull landlord can’t improve their Maghull property enough, conceivably, could this be extended?

But let's not forget tenants in all of this.

And good tenants are a landlords lifeblood.

And we think it's important to remember that landlords have a responsibility to tenants too. They're a part of this conversation but are often ignored when landlords and commentators start thinking about cost.

It's not just about scrimping on the bare minimum outlay - what about future-proofing your property? What about helping tenants to control their household bills at a time when utilities costs have spiralled? What about educating your tenants on how to conserve energy and manage the property better.

What about working with an agency that will help you do that.

So, what are the options?

One thing you could do is put your head in the sand and hope it all goes away!

Another thing some savvy landlords do (be they our clients, clients of other letting agents in Maghull or even self-managing landlords) is to sit down and plan a strategy for their Maghull rental portfolio. We look at all the EPCs of their rental portfolio, look at the recommendations, then discuss a plan to ensure they are covered whatever the Government decides to make the new EPC rules. Like all things in life, plan for the worse and hope for the best.

If your agent isn't offering that service, please drop us a line because we would hate for you to miss out on the advice and opinion that so many landlords have already had from us.