How can EPCs help the UK reach net zero by 2050?

According to the latest report by Propertymark, financial implications, practicality, consequences, and communication are key concerns when measuring energy efficiency.

Related topics:  Propertymark,  ESG
Tabitha Lambie | Editorial Assistant, Property Reporter
22nd August 2023
energy house 5
"73% of homebuyers have at least some interest in EPCs but its influence on purchase decisions is limited."
- Propertymark

In October 2021, the Government published its Heat and Building Strategy which set out how the UK will decarbonise its homes and commercial, industry and public sector buildings in line with its commitment to reach net zero by 2050.

Since then, the goalposts for properties to reach a minimum EPC C rating have moved, with continual consultations on various reforms. Targets and regulations are also in the process of being reviewed by governments and departments in Wales, Scotland, and Northern Ireland.

Reviewing the influence of Energy Performance Certificate (EPCs) on the decisions of homebuyers, property investors, and tenants, Propertymark’s latest report reveals that while there is some consumer interest in EPCs, the level of importance varies across different sectors.

In the residential market, 73% of homebuyers have at least some interest in EPCs but its influence on purchase decisions is limited. Likewise, tenants in the rental market have shown some interest. However, in the commercial market, the interest and influence of EPCs is considerably lower with 41% of Propertymark’s commercial member agents surveyed, reporting that investors haven’t shown an interest in EPCs while 59% said there was no interest from tenants.

This may be due to the limited supply and other priorities such as location and logistics. Nonetheless, as pressure grows for businesses to demonstrate their green credentials, the importance of energy efficiency in the commercial sector may increase.

Looking at the Government grants covering a broad range of home improvements, Propertymark found that 72% of residential and commercial agents cite these grant as the most important factor when driving for change. This was followed by 67% of agents highlighting that allowing energy efficiency improvement costs to be offset against capital gains tax, as well as reducing tax on the purchase of home movers next property are key incentives.  

Commenting on these findings, Timothy Douglas, head of policy and campaigns at Propertymark, has said:  

“Our most recent research shows that, while interest in energy efficiency ratings is growing, a higher EPC rating of a property is not having a significant impact on the sale price in most instances.

“If governments and departments across the UK are serious about moving to net zero through reducing the energy consumption in homes and buildings, landlords and homeowners need a greater financial incentive and support to make energy efficiency improvements.

“The majority of our member agents agree that the best way to do this is to provide clarity on targets, enhance the role of EPCs and introduce grants that cover a broader range of improvements, which is especially important at a time when rising mortgage and other living costs are making it more difficult for many homeowners and landlords to foot the bill for these upgrades.”

Consequently, Propertymark has suggested five recommendations: avoid a ‘one-size-fits-all’ approach; ensure timely implementation and provide clarity on targets; provide financial incentives and help reduce energy bills; embark on a national communication campaign; explore the introduction of a property passport.

Propertymark believes that policymakers must move away from ‘one-size-fits-all’ policies and develop energy efficiency proposals since they work with different ages, conditions, and sizes of properties. If policymakers avoid a ‘one-size-fits-all’ approach then grants and funding support can be targeted based on the archetype of a property rather than its tenure and making each property as energy efficient as possible. Consequently, property is not lost from the private rented sector and buildings don’t become too expensive to improve.

To effectively plan to retrofit homes, Propertymark says homeowners and landlords require clarity on how energy-efficient properties need to be, how it will cost, and by when. Currently, there is no definitive target that has been legislated for, only recommendations from multiple reports. As such, the UK and Devolved Governments need to develop a long-term policy framework and legislate clear targets for EPC ratings, so people can implement energy efficiency measures.

Likewise, Propertymark believes alternative incentives should be established so that investing in energy efficiency doesn’t lead to higher house prices. These incentives could include vouchers to cover the costs of retrofit evaluations, loans and grants to pay for energy efficiency improvements, allowance of energy performance improvements to be offset against rental income, or the ability to offset improvement costs against capital gains tax which must be provided to support homeowners and landlords to act.

Propertymark believes that solving the challenge of convincing landlords and homeowners of the benefits of retrofit and making energy efficiency improvements is vital if the UK wants to meet its decarbonisation targets. Landlords and owner occupiers play a significant role in the success of retrofitting, substantially impacting the uptake of energy efficiency improvements and retrofit programmes, even when Government funding exists to cover the cost.

Finally, Propertymark says that information should be transferable across building owners to help maintain sight of a long-term decarbonisation goal for the building. This process would not replace EPCs, but enhance them. A property passport would provide detailed guidance on the actions required, and already undertaken, to improve the property. This should be based on building fabric and operational data, so that building owners and occupiers can make decisions to improve the energy efficiency of buildings.

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