EPC changes scrapped – but most landlords were already prepared

Last week, the government scrapped the upcoming EPC changes for rental properties.

Under the proposals, landlords had to ensure their properties had an Energy Performance Certificate (EPC) rating of C or higher. Originally, this target had to be met for new tenancies by 2025, followed by all tenancies from 2028.

Earlier this year, this deadline changed. In March 2023, government announced that all rental properties had to have an EPC rating of C or better by 2028. However, it also announced the penalty for non-compliance would rise from £5,000 to £30,000.

All of these EPC changes have now been jettisoned. Instead, government says it will encourage landlords to upgrade the energy efficiency of their properties where possible.

EPC changes binned

Given the expense of upgrading properties – especially older ones – many landlords are likely to have welcomed the changes. However, a study by Shawbrook Bank has revealed that 80% of landlords were already prepared for the original 2025 deadline. 30% already had properties with an EPC rating of A-C, while 50% said they had plans to improve their properties’ EPC ratings by 2025.

In addition, the research found that nearly half of landlords have spent money improving or investing in their properties over the last year. The mean amount spent was £25,148, rising to £37,164 for London-based landlords.

In short, it’s clear that large numbers of landlords have spent money complying with the new rules, only to see them scrapped!

Is it still worth improving EPC ratings?

While the EPC changes have been scrapped, there may still be good reasons for improving the energy efficiency of your rental properties.

Firstly, while the government currently has no plans to reintroduce the EPC changes, we’re in the run up to a general election. This has to take place no later than 28 January 2025, but is widely expected to occur in 2024. Ed Miliband, the shadow secretary for climate change, has already pointed out that Britain has the ‘worst insulated homes in Europe’ and is in favour of ensuring landlords upgrade their homes to an EPC rating of A-C.

As a result, if Labour wins the election, there’s every chance that the new EPC rules will be back on the table.

Secondly, upgrading the energy efficiency of your rental property will make it more attractive to tenants. While energy bills have dropped since their recent peak, they’re still much more expensive than they were at the beginning of 2022. As a result, many tenants will be looking for homes that are less costly to heat.

Other changes worth knowing about

In addition to scrapping the EPC changes, the government announced other measures relating to energy efficiency. Three in particular will be of interest to landlords. These are:

1. The Boiler Upgrade Scheme grant will increase to £7,500. This money can be used to upgrade from a gas boiler to air source or ground source heat pumps. The scheme is open to landlords and you can check your eligibility here.
2. Oil and LPG boiler installations in off-gas-grid homes will be allowed to continue until 2035. They were to be phased out from 2026.
3. There’ll be an exemption when fossil fuel (including gas) boilers are phased out in 2035. Households that struggle to switch to heat pumps or other eco-friendly alternatives won’t have to. It’s thought this will cover about a fifth of homes, particularly those that require expensive retrofitting or a more powerful electricity connection.

Summary of EPC changes

If you’ve not already upgraded the energy efficiency of your rental properties, you no longer have to. That said, if you had plans to implement the EPC changes, it may be wise to do so. There’s no guarantee the changes won’t be re-introduced. Additionally, tenants are now more likely to want more energy efficient homes. If you’d like any advice on investing in your rental portfolio, talk to THP today – we’re the accountants for landlords.