Should Derby Landlords Be Worried About These New Rental Regulations?
How worried should Derby landlords be about the new proposed rules regarding the EPC rating of their rental properties? All rental properties require an EPC. From April 2020, the Minimum Energy Efficiency Standards (MEES) regulations state that all private rental properties have a minimum EPC rating of ‘E’ or above. The rules could change again...
Everyone should be doing their bit to help reduce the UK’s carbon footprint on the globe, of that there is no doubt. Yet the question is, is that burden being put too much on the shoulders of Derby landlords with potential bills of £7,600+ in the next four years?
The background to this is that 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.
As one-fifth of the UK's carbon output comes from residential property, to hit that carbon-neutral target 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 since 2007. 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 muting the idea that all new tenancies 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…
Around 70% of all private rented properties in Derby have an EPC rating of ‘D’ or below.
The problem is that many Derby landlords will find it very expensive, neigh impossible, to improve the energy efficiency of their Derby rented properties, especially those Derby landlords who hold older housing stock such as terraced properties built in the 1800s. These Victorian terraced houses never perform well on EPC ratings as they have solid walls.
Now, 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 theoretical cost to improve all Derby’s private rented properties will be a minimum of £96,034,800.
Before I talk about what the options are for Derby landlords, here’s the weird part about EPC’s. An EPC rating is calculated on the cost of running a property and not the carbon output or energy efficiency, despite being called an Energy Performance Certificate!.
My advice to Derby landlords - although it’s correct to create a future strategy, all I can say at this point is 'more haste less speed'. These 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 Derby landlords have to spend to get it to the existing EPC ‘E’ target grade on private rented homes. In other words, if you have a privately rented home with 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 Derby landlord can’t improve their Derby property enough, conceivably, could this be extended?
So, what are Derby landlord’s options?
One thing you could do is put your head in the sand and hope it all goes away! Doubtful.
Another thing some savvy Derby landlords are doing whether they be current clients of ours, clients of other letting agents in Derby or even self-managing landlords, is to sit down and plan a strategy for their Derby rental portfolio. I print off 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 me a line because I would hate for you to miss out on the advice and opinion that so many Derby landlords have already had from me. The choice is yours.
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