Over recent years landlords have faced a raft of legislative changes that have inevitably had an impact on how they manage and operate their portfolios.
Some would say that certain changes were simply the introduction of more bureaucratic red tape to deter would be investors from investing in the rental market.
Others would argue differently, claiming that these changes have resulted in a fairer marketplace, where the tenant is better protected and removing more unscrupulous landlords who portrayed a negative impact on the whole sector.
Whatever point of view, the latest proposed changes could have a significant impact on landlords and their rental properties.
The Government is proposing increasing the Minimum Energy Efficiency Standards (MEES), contained in the Minimum Energy Efficiency of Buildings Bill.
Landlords know that when their properties are being let or sold, they need an Energy Performance Certificate (EPC), designed to measure the property’s energy efficiency.
All properties must meet a minimum standard - Level E before a property can be rented and failure to meet that standard can result in hefty fines.
However, new EPC regulations would mean that from 2025, rental properties would require a certification rating of C or above.
It is our understanding that these proposed changes will be phased in over several years, with new tenancies all compliant by 2025, and all tenancies existing tenancies from 2028.
Whichever way you look at it, this could have a significant financial impact for landlords in striving to bring their properties in line with the new guidelines, especially as they will not be allowed to advertise property for rent if the EPC is not rated at C or above.
What does this mean for UK landlords?
For many landlords this change will mean investing in additional insulation, lighting, double glazing, A rated energy efficient boilers and smart meters to reach the new minimum MEES. In fact, some industry experts believe that the new regulations and requirements may not be achievable – we have read of as many as 33% believing they will be unable to reach the required minimum target.
Of direct greater concern to landlords will be return on their investment (ROI). Recent analysis by one lender stated that many cited the lack of ROI as their primary concern and not the up-front costs to achieve the minimum MEES.
For example, older Victorian properties will cost far more to upgrade to meet the new requirements than newer properties but, the investment is not likely to be matched by increases in rental income.
The proposed bill is set to be read and debated by MP’s this Autumn, but with an estimated 60%, or 2.9m rental properties falling short of the proposed minimum MEES, the investment cost to meet the Government objective could be huge.
Open Property Group believe that nobody would argue that we all have to do something to improve property energy efficiency and contribute to reducing our collective carbon footprint.
As mentioned, for landlords they face more red tape, increased costs with the likelihood of minimal return on their investment, certainly in the short term.
For tenants however, this will be good news. Their homes will be more efficient, warmer, potentially cheaper to run, and create an overall improved living environment. Overall, the aim must be that we all end up with a more efficient housing sector better positioned for the environmental challenges of the future.
So, the proposed changes are designed to ensure homes are more energy-efficient, all contributing towards the government's net-zero targets. Whilst that has to be good for us all, the key question is can it be achieved in the timescales and what backlash from landlords will this create?
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