It’s been in the news quite a bit since this article was originally published back in April 2023. What else have we learned since then? The Prime Minister, Rishi Sunak, seemed to suggest that landlords will not be required to update their properties to reach an EPC Band of C or at least by the original date of 31st December 2025. As EPC assessors, we’ve thrown ourselves into this to see how it will affect our customers.
Table of Contents
- What are The Proposed MEES Changes?
- Why is this Update to the MEES Needed?
- What will Landlords Need to do?
- Improved Property Values & Rentals
- Protect Your Investment Ahead of The MEES Changes
What are The Proposed MEES Changes?
Let’s begin with a quick recap and fill in any blanks. Landlords cannot currently rent a property that has an EPC rating of either Band G or Band F.
The proposal, currently in the commons awaiting its second hearing, with the snappy name of Minimum Energy Performance of Buildings (No. 2) Bill, is poised to raise this minimum energy efficiency standard (MEES) to a Band C. This means any property with a Band D or worse cannot be rented. The proposed dates are to apply this to all new tenancies from 31st December 2025. Existing tenancies are scheduled to comply with these laws by 31st December 2028.
Nothing much has changed since earlier in the year when this bill was in the news. The bill is still awaiting its second hearing. This is mixed news for property investors. The bill is still likely to progress, but not on its original timescales. We’re probably looking at late 20s for any implementation.
Why is this Update to the MEES Needed?
Net zero by 2050 is the primary factor behind the inception of this change.
The housing stock in the UK currently contributes 26% of the countries carbon emissions. To be able to achieve this target, reduction in CO2 originating from houses is necessary.
60% of homes in the rental sector currently have an EPC rating of D or below, meaning that firstly, there are a lot of homes that will require efficiency upgrades and also, a large portion of the housing emissions can be reduced here too.
Through regulation, the government are able to mandate that homes within this sector meet these efficiency standards. Some grants are available, but landlords will be liable for a significant amount of the costs. It would be difficult to force people to upgrade the homes which they are living in and have to take the carrot, rather than the stick approach here.
What will Landlords Need to do?
Let’s get the bad news out the way quickly. You’ll be expected to spend up to £10,000 to bring a property up to a Band C. If you’ve got a portfolio, you’ll be expected to spend on average £4,700 per property. What do you need to spend this money on?
This depends on the property. If you’re skirting on the cusp of a Band C, fitting energy saving light bulbs may be enough. Others may require more significant upgrades.
Our advice is to get an Energy Report from your EPC assessor. An energy report is similar to an EPC but you don’t get a certificate. The EPC calculation methods change frequently, so what may have been a Band C ten years ago, could now be a D or an E. This energy report uses the EPC calculations and will provide you with an up to date overview of your property. Your EPC assessor will be able to run multiple scenarios and give you a clear path to Band C.
We have done this multiple times for property investors. Recently in Liverpool, our clients EPC had lapsed and he wanted to future proof his investment. We ran an Energy Report and we saw that solar PV panels provided the easiest and most cost effective route to Band C. We specified the system he would need to comfortably land him in Band C. He used this information to get multiple quotes, chose his installer and once it was on the roof we completed an EPC which guarantees a C Band until 2033. With the solar panels this landlord is also able to take advantage of the Smart Export Guarantee and sell excess energy back to the grid to offset his initial costs of the PVs.
Improved Property Values & Rentals
Although the costs may be significant, it can be looked upon as an investment. There is a strong link between homes with higher EPC scores and higher resale values. It makes sense. If you’re looking at two similar homes, the one which has cavity wall insulation or solar panels, you may be prepared to spend a little more on.
We’re also seeing a trend of lenders requesting EPCs on re-mortgages and sometimes offering cheaper rates on homes with higher EPC ratings. On the rare occasion we’ve seen lenders requiring a Band C already! Part of this is due to reduced running costs of the home so the owner will have more disposable income and be less likely to default. The other part is that homes with a higher EPC rating are more likely to be well maintained.
At the time of writing, there is stiff competition for every home that enters the rental market. We’re based in Warrington and rents are higher here than they have ever been because of this. Once the market cools down and renters have more choice, a home that costs less to run will likely be one of the deciding factors when choosing a home to live in. By increasing your EPC score to a Band C, you are signalling to potential tenants that your house is in fact less expensive to run.
Protect Your Investment Ahead of The MEES Changes
The MEES are unlikely to be implemented on schedule in 2025. It is likely that they haven’t been scrapped altogether. I just cant see a way that the government can achieve its net zero goal without huge changes in the housing stock.
As discussed earlier, it makes good business sense to have an energy efficient home on the rental market. However, it is wise to get ahead of the pack. If you attain a Band C on your EPC now, its locked in until 2034.
We also know that the calculation methods change over time too. What falls in to a Band C now, maybe a Band D in 5 years time.
As we get closer to the implementation of the MEES changes, trades will become busier and prices will rise. The same for EPC assessors like ourselves too. The EPC will become more than a tick box. It will be an extremely important factor when buying or renting a house.
Don’t wait, speak to your local EPC assessor to get ahead of the pack.