The Warm Homes Plan, which is the government’s new building efficiency policy, makes reference to the tightening of MEES (Minimum Energy Efficiency Standards) for private rental properties. The new rules will come into force on 1st October 2030 for all rentals (though short-term/Airbnb-style rentals are currently exempted), with social rentals having further restrictions.
The key requirements will be having either: a valid EPC C (or better) certificate for the property dated before 1st October 2029 (which will then be valid for the life of the EPC) or, when the new EPC model comes in, “to meet a primary standard set against the fabric performance metric on new EPCs and a secondary standard set against either the smart readiness metric or the heating system metric on new EPCs”, expected to be similar to a current EPC C.
This is tighter than current rules (which remain in force until the new ones come in) of EPC E, but also the financial exemption is more onerous – the landlord must either achieve the target or spend £10,000 improving the property energy efficiency, at which point no more needs to be spent for 10 years and an exemption can be granted – but the £10,000 still needs spending! The good news, though, is that it is planned to be allowable as a tax-deductible expense.
There are some other exemptions (principally where suitable improvements can’t be made or the property is below £100k in value), but the bottom line is that a property that isn’t EPC C already will need money spent on it to get it there, or even to get it close. So what does this mean for landlords? We point to four things:
1: An EPC C property as a buy-to-let may have a premium from a value perspective. Nationwide has already suggested that EPC C and above properties are worth a little more to BTL investors, and this may intensify, but problem properties are likely to be a struggle, as the costs could be high. An opportunity here could be to target EPC D properties that would be cheap to upgrade, avoiding the value premium today but banking a better EPC in time
2: £10,000 is a lot, and most properties won’t need that, but landlords need advice on what will get them to EPC C for the least money or with the least disruption to existing tenancies. Companies like Genous specialise in retrofitting properties and can advise on the best options for a given landlord's objective.
For some properties, it may only take £250, while others will need deeper interventions – but ignore the recommendations on your EPC, which in most cases are not helpful or useful.
3: Getting an early EPC C could be a safe upgrade if the costs aren’t too high. We don’t know how the new EPC model will work, and whether it will be easier or harder, but we do know that EPCs granted before October 2029 will qualify for a decade. And the supply chain will probably tighten before this deadline, pushing prices up or reducing availability.
4: This should be a sell to tenants, but it has to be done right. Reducing heat loss drives down bills, while putting in the right time, clean technology can also reduce utility costs for the tenants.
But poorly done bills can go up, and home comfort can be reduced. Don’t hit the targets by making the property less attractive for tenants – show you can make it more attractive, and the new EPC is the evidence for it.
Ultimately, this is going to happen, so the best strategy for landlords is to make it easy to comply with and use it to boost rental or absolute property value.
