Will an EPC overhaul make the PRS more efficient?

The government is planning a major rewrite of home energy efficiency rules – but is the system fit for purpose?

Last month, politicians opened a consultation on replacing the Standard Assessment Procedure with a new Home Energy Model, which accounts better for green technology such as heat pumps and home batteries. In the long term, this would change how Energy Performance Certificates are awarded – potentially affecting the demand for properties and even whether they can be rented out legally.

In other EPC news, Rightmove’s General Counsel David Cox foresees that the prospect of tougher EPC requirements for landlords could return, after the government scrapped plans to raise the minimum from EPC E to EPC C last year.

Who will save and who will pay?

Tenants could welcome tougher energy efficiency rules if it cuts their costs: 39% more Britons fell behind on their energy bills in December 2023 compared to a year previously. According to activist group Generation Rent last year, private renters are more likely to be in fuel poverty than homeowners or social renters. And from this month, Ofgem’s energy price cap has risen again, to the tune of £94 a year for an average household.

Landlords aren’t necessarily against making green improvements: a survey by mortgage lender Landbay found that 62% of landlords with lower-rated properties still planned to bring them up to EPC C. Nevertheless, that is still fewer than the number before the change, when 73% planned to make improvements. The survey also found that 74% of landlords were in favour of scrapping the mandatory EPC C target.

Until it was scrapped, the looming threat of EPC C was a key reason for landlords quitting the sector, a perennial issue threatening sector growth and driving housing policy. Reverting to higher energy efficiency targets would again push more investors out. And even if tougher targets don’t come back, a change to the way EPCs are calculated could mean that some previously compliant properties no longer meet the minimum target.

Enforcing energy efficiency rules

While politicians consider new energy efficiency regulations, they are struggling to enforce the ones they already have.

Freedom of Information requests last year revealed that the Scottish government and some of the country’s biggest local councils don’t know how many rental properties have no valid EPC – even though it’s been a legal requirement since 2009.

And Scotland isn’t alone. A survey by the Association of Decentralised Energy released this month found that 25% of councils surveyed in England and Wales aren’t enforcing energy efficiency standards at all, and another 20% only investigate when they get complaints from tenants.

Given the patchy enforcement of energy efficiency rules and the risk of scaring off investors with mandatory targets, the private rented sector might benefit more from carrots than sticks. After the EPC C target was scrapped last year, Propertymark recommended that the government offer smarter energy efficiency grants that cover a wider range of green home improvements – an option backed by 80% of the sales and letting agents they surveyed. If the proposed Home Energy Model becomes the energy efficiency standard, that could pave the way for new grants or tax breaks for green tech.