Energy efficiency is becoming an increasingly important driver of value in the private rented sector with more efficient homes commanding both higher rents and sale prices, according to new research from The Mortgage Works.
Its latest Private Rental Energy Performance Report shows that over half (51%) of privately rented homes in England are now rated EPC band A to C, up from just 25% a decade ago, highlighting a steady improvement in housing standards ahead of tighter regulation.
Under current proposals, all rental properties will need to meet a minimum EPC rating of C by 2030, subject to cost caps and exemptions, placing further pressure on landlords to upgrade stock.
The data shows a clear financial incentive to do so. Properties rated A or B attract an average rental premium of 8.1% compared to similar D-rated homes, equivalent to around £85 per month. Even C-rated homes achieve a smaller uplift, while less efficient properties face a discount.
POINT OF PURCHASE
Buy-to-let investors are paying a 12.2% premium for A or B-rated properties, significantly higher than the uplift seen among owner-occupiers, underlining the importance of energy performance to landlords’ long-term returns.
However, the report highlights stark regional variation. The North of England sees the strongest price and rental premiums for energy-efficient homes, while London and the South show more limited financial upside, despite higher baseline property values.
At the same time, the cost of upgrading older housing stock remains a major barrier. Bringing a pre-1919 property up to EPC band C costs an average of £10,700, compared to around £2,500 for more modern homes.
Overall, the average cost of upgrading a rental property to band C varies widely by region, ranging from around £5,100 in the North East to £8,600 in the West Midlands.
BALANCED ECCONOMICS
For many landlords, particularly those with older or lower-yielding properties, the economics are finely balanced. While rental uplifts and capital value gains can offset costs in some regions, the report suggests that in parts of southern England, the financial return may not justify the investment.
Despite this, regulatory pressure is likely to drive further change. Failure to meet minimum energy efficiency standards could result in fines of up to £30,000 per property, reinforcing the need for landlords to factor compliance into portfolio strategy.
As a result, energy efficiency is shifting from a “nice to have” to a core consideration in buy-to-let investment, influencing both pricing and long-term viability across the sector.
ONGOING CHALLENGE
Megan Eighteen (amin picture, inset), President of ARLA Propertymark (Association of Residential Letting Agents), says: “The Mortgage Works’ latest report highlights both the progress made and the ongoing challenge of improving energy efficiency across the private rented sector.
“It’s encouraging that more than half of privately rented homes are now rated EPC A-C, which can help tenants benefit from warmer homes and lower energy bills.
“However, much of this progress has come from newer properties, with the biggest challenge now focused on older homes that are more complex and costly to upgrade.”
REGIONAL VARIATIONS
And she adds: “The stronger gains seen in the North reflect lower property values and more room for improvement, making it easier for some landlords to invest. But this varies across the country, and in many cases upfront costs remain a significant barrier.
“We support the ambition to raise standards, but targets must be realistic and backed by proper funding and clear guidance. Without this, there is a real risk that landlords will scale back investment or exit the market.
“Over time, that could reduce the number of homes available to rent, which may put further pressure on affordability for tenants.”
