In an announcement to the British public this week, Prime Minister Rishi Sunak revealed that he has decided to scrap EPC targets requiring landlords to bring private rental properties up to a minimum level of C by 2025. We discussed these targets in depth in a previous article from February here.
While EPC ratings may seem slightly nebulous at times, their importance cannot be understated. Whether you are a renter, a home owner, business owner or a landlord, EPC ratings have a profound impact on our lives, affecting everything from the warmth of our homes, to how cheap our bills are.
The new announcement formed part of a watering down of UK environmental policies more generally. Other reversals included a delay on the ban of the sale of petrol and diesel cars to 2035, as well as a delay on the transition from gas boilers to heat pumps.
The government’s decision has been met with a mixed response within the property sector. On the one hand, Landlords will rejoice as they no longer have to retrofit their homes to meet the minimum C rating. However, other senior figures within the property industry have decried the decision.
The National Housing Association said that the decision was “hugely disappointing” and that scrapping the targets could “lead to people facing higher bills for years to come”. A body representing the other side of the housing industry, the National Residential Landlords Association (NRLA), praised the decision to scrap plans to fine landlords for not meeting the minimum energy efficiency standards (MEES). Despite this, they also criticised the uncertainty over Government policy, describing it as “hugely damaging to the supply of rented properties”.
What does the EPC targets reversal mean for tenants and landlords alike?
Overall, the measures previously in place to improve the minimum energy efficiency requirements for residential tenancies would have only been a good thing for tenants.
The energy crisis last winter demonstrated how poor the energy efficiency of some homes were, especially in the face of astronomical energy bills which were subsided by the government through the energy price guarantee. No one quite knows what the situation will be regarding energy bills this winter, however some experts estimate that they will be more expensive for millions of homes given the withdrawal in support.
The latest government data on energy efficiency within the private rented sector shows that of the 4.6m private renters, 56% of them live in homes with a EPC rating of D or below. The proposed changes would have therefore made a huge difference to the living standards of private renters in the UK.
It is also worth pointing out that many landlords have already invested money into ensuring that their properties met the C level for the EPC rating, given that the expected changes were just two years away. Consequently, many will feel aggrieved by the sudden U-turn, contrary to what one might expect. Some will also have sold their properties due to the costs involved in upgrading to the minimum standard.
Furthermore, the lack of a rise in the minimum energy efficiency standards will also have a detrimental impact on the government progress towards its net zero targets. The UK government has set a target of reaching net zero greenhouse gas emissions by the year 2050. The latest announcement by the Prime Minister, which water down several of the government’s climate commitments, put this target in jeopardy.
What is an EPC rating?
An EPC rating provides a useful indication of how energy efficient a property is. This is helpful information for anyone looking to lease or purchase a property, whether it is residential or commercial.
Properties are rated on a scale from A to G. As previously mentioned, since April 2020 residential properties must be rated at least an ‘E’, with commercial properties now also required to be rated as such.
Owners of commercial properties that do not have an EPC rating of A to E will need to carry out sufficient works in order to bring the properties up to scratch, register a valid exemption, or face the consequences of a penalty. While MEES does not prohibit the sale of a property which falls into the ‘F’ or ‘G’ energy performance category, they are unlikely to be as easy to sell given that it will no longer be possible to lease properties in these categories.
Our comments
The reversal by the government adds further uncertainty to the property market at a time when it is already precarious, particularly in major cities where demand for rental properties is sky high.
As part of the 2015 Paris Climate Agreement, the UK has legally committed to at least a 68% reduction in its greenhouse gas emissions by 2030 compared with 1990 levels. The latest announcements certainly make this target far less achievable. Despite this, Sunak has said that the UK is still committed to the legally binding net zero targets.
The UK government is likely to face several legal challenges in terms of the UK being able to meet its climate legal commitments due to the latest changes. Whether these legal challenges will be successful remains to be seen.
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