The government is making a push to improve the energy efficiency of homes, principally targeting the private rented sector, where, with a few caveats, homes must achieve an EPC rating of E or above before they can be let.
However, the government is now considering going further, requiring that all privately rented homes, again with a few exceptions, will need to achieve an EPC rating of C or above from 2025 or 2026.
At present, only around 45% of rented homes have an EPC rating of C or above, which means that more progress is needed. However, this score is still higher than for homes that are privately owned. Why is this? Buy-to-let investors have typically acquired smaller, more energy efficient city-centre flats. Owner occupier properties tend to be larger, older and less energy efficient homes.
The private rented sector is making strides towards more energy efficiency. An analysis of successive EPCs carried out on the same home each time it is let out suggests that the ratings of 40% of rental properties are improving. This compared with 36% for owner-occupier properties and just 24% for homes owned by social landlords.
To date, a system based on sticks rather than carrots has obliged private sector landlords to undertake energy efficiency improvements. By contrast, owner-occupiers have benefited from incentives in the shape of grants, although the progress in this sector towards better EPC scores has been slower.
This is set to change, however. Higher fuel prices will reduce the payback time for eco-friendly measures, making changes worthwhile in return for lower bills.
Mortgage lenders are also beginning to launch green mortgages which offer more favourable terms to borrowers who carry out eco-friendly improvements. Such borrowers spend less of their income on utility bills, which lowers the lender’s risk. Typically homes with an EPC rating of A or B qualify for a deal with a 0.1% lower rate, plus a cashback of several hundred pounds.
In the case of most homes, the combination of comprehensive insulation in the roof, walls and floor, a new boiler and modern double-glazing should secure an EPC B rating. Some form of renewal energy generation is usually required to achieve an A rating. But as energy prices head upwards, the incentive to make homes as energy efficient as possible, is steadily growing.
