Landlords believe it will cost an average of £11,713 per property to bring rental homes up to a proposed EPC C standard according to new research highlighting the scale of the retrofit challenge facing the private rented sector.
The latest Landlord Trends research from Pegasus Insight found that 60% of landlords own at least one property currently rated below EPC C, meaning many face potentially significant investment requirements should tougher energy efficiency standards be introduced.
Despite the anticipated costs, the research suggests most landlords remain committed to improving their properties.
Almost two-thirds (62%) of landlords affected by the proposed changes said they intend to carry out the necessary upgrades, an increase of 13 percentage points compared with the previous quarter.
FUNDING CONCERN
While many landlords expect to use personal savings to finance at least part of the work, others are already exploring alternative options, including government grants, additional borrowing, further advances and releasing equity from existing properties.
The research points to a substantial funding requirement across the private rented sector if landlords are to meet future energy efficiency expectations while maintaining viable rental businesses.
The challenge is compounded by the gap between what landlords believe is financially viable and the expected cost of compliance.
According to Pegasus Insight, landlords consider energy efficiency improvements to become uneconomic at around £9,000 per property, significantly below the estimated £11,713 needed to achieve EPC C.
TENANT DEMAND
The findings also suggest tenant demand is helping drive improvements. Separate research conducted by Pegasus Insight found that 44% of renters consider a property’s EPC rating an important factor when choosing where to live.
As a result, landlords are increasingly looking towards lenders and specialist finance providers for support.
When asked what would make improvements more achievable, landlords highlighted options such as green finance products, preferential borrowing rates for energy-efficient homes, further advances and easier access to retrofit funding.
RETROFIT FINANCE
Mark Long (main picture, inset), Founder and Managing Director of Pegasus Insight, says: “For many landlords, the question is no longer whether properties need to become more energy efficient, but how those improvements will be funded.
“Most landlords are willing to invest, but the costs involved are substantial.”
He added: “Our research found that landlords believe energy efficiency improvements become financially unviable at around £9,000 per property, yet they estimate the cost of achieving EPC C will average almost £12,000.
“That leaves a significant funding gap. Many landlords are actively looking for financial support to bridge that gap, creating a significant opportunity for lenders to help unlock investment across the PRS.”
