Hello Readers,
One policy that the Conservatives scrapped, but Labour has brought back in is in relation to EPC ratings for privately rented properties.
In very simple terms, the proposal is for homes in the private rental sector to have a minimum requirement of EPC C by 2030 to continue being let. Along with this change is an increase to the spend ceiling from £3,500 including VAT to £10,000 including VAT.
This policy has very much concerned landlords, many of whom do not have significant financial resources to spend £10,000 on upgrades and rely on the income from properties for their day to day living costs.
If we consider that a single let with a mortgage will generate you around £250-£500 positive cashflow per property, spending £10,000 will wipe all profits for around two to four years. This is crazy!
Cash grants made available
Good news has recently hit the press in that grants will be made available for landlords to make EPC upgrades in a relaunched Warm Homes: Local Grant Scheme.
Landlords will receive funding to cover the cost of upgrading a single property, with a cap ranging from £15,000 to £30,000 based on the type of upgrades. For portfolio landlords, they will be required to cover half the cost for any additional properties.
This has very much been welcomed, however on further reading there appears to be a few catches that will mean a large proportion of landlords will not be able to access the funding.
If we look a little closer, the grant is only available to:
- Properties in eligible postcodes (covering about half of the country, focusing on areas of deprivation)
- Landlords of tenants on certain benefits
- Or landlords of tenants whose income is below a certain level
The good news is that Medway council are part of the scheme and eligible postcodes can be checked here.
I’m not 100% clear on how to access the grant, however the gov.uk website states that the expression of interest window will open in October 2024, so when I know more details I will write a follow up article.
Nothing is confirmed, but could EPC requirements lead to supply problems?
With around half of UK properties needing an EPC upgrade, it’s quite likely that this change will lead to more supply problems as landlords continue to sell up.
Reading an article in The Negotiator, one agent who wishes to remain anonymous has commented that the Government will be in for a sharp dose of reality too late in the day:
“I think the industry is sleepwalking into disaster,” and that, “by the time they realise what is really happening it will be too late.”
Interestingly, I have been reading in the FT advisor how research from Hamptons suggests that “Landlords are not expected to achieve universal EPC A-C rating until 12 years after the government’s target date.”
The problem landlords face is that requirements to meet the new EPC targets are not yet confirmed in law. The existing requirement of grade E is still current, so whilst funding may be available in some instances it’s possible that landlords will fork out thousands on upgrade work and then government policy changes meaning that money has been spent without needing to (or the goalposts move).
What are my thoughts on this? I do think that a tighter requirement is very likely at some point, however I wish that the Government would make up their mind and confirm, so landlords have some certainty!
In preparation, however, I recommend that current EPC ratings are re-done and landlords begin putting a plan in place so as to action it when (and if) the policy is confirmed.
I trust you found this helpful and as usual, the best way to get in touch with any questions is via LinkedIn.
Hasan
