Back in September, Rishi Sunak announced a series of changes to the government’s green commitments. Among these included the scrapping of Energy Performance Certificate (EPC) policies aimed at landlords. As it previously stood, newly rented properties required an EPC rating of C or above from 2025 while it was expected that all existing rental properties would need the same certification by 2028.
The fact that Sunak ditched these is not a huge surprise. There had long been friction over the policies and the costs needed to implement them. Housing Secretary Michael Gove’s admission in July that the government was “asking too much too quickly” signaled that change may have been in the air.
The bigger picture
For some landlords, Sunak’s U-turn acts as a reprieve after a particularly testing 12 months in the wake of the mini-Budget and the subsequent rate rises. One key sticking point was the cost associated with making necessary changes. According to the English Housing Survey, 46% of private rental homes would need to spend between £5,000 and £9,999 to reach band C, with others facing costs of over £15,000. It’s worth noting though that other estimates were significantly higher, with some predicting average costs of £25,000 nationwide to make a property compliant. An outlay like this can be a huge ask, particularly for those with a small portfolio and high outgoings. While grants were available, what was actually offered differed from council to council.
Industry reaction
Viewing the U-turn as a reprieve is a sentiment echoed by Lea Karasavvas, Managing Director of Prolific Mortgage Finance. “The delay comes as good news for landlords and ultimately good news for tenants as it gives them more assurance of remaining in their home. Many landlords had considered asset stripping, due to the tight deadline initially of 2025 and hopefully the abandoned target eases that burden, therefore giving them more confidence in their ability to retain their properties and allow their tenants to remain in their homes.”
Despite this, Lea is also careful to point out that many landlords and brokers are still in favour of green policies.
“Whilst I do believe that energy efficient properties and ‘green’ properties should continue to be supported, it does ease the burden on landlords and hopefully results in a reprieve that will allow those fearful of the financial hit more time to plan these changes, and less of a need to sell up and cash in. Moreover, it gives tenants more stability and less likelihood of the need to re-home as landlords may now hold, with more capital reserves to manage the payment shock of increase costs of borrowing, that they may not have otherwise had.”
An opportunity to reset
Considering Lea’s comments, as well as the opposition Sunak faced when changing these policies – including an outcry from several senior Tories – it seems unlikely that this is the last we’ll hear regarding EPC updates. Instead, this can now view this as a chance to take stock and assess your options, as well as your finances. September’s base rate freeze indicated that we may have already hit the rate rise peak. If that is the case and rates do start to fall then this could free up some capital, enabling you to upgrade your properties.
It also provides policymakers with the time to stress test flaws and ensure that any future legislation is achievable, and not to the detriment of landlords. After all, many landlords supported the reasoning behind the EPC changes, but it was the process that caused contention.
Solutions from MT Finance
At MT Finance we remain committed to supporting landlords and investors. If you are looking to access finances to fund an update to any of your investment properties, a bridging loan could help you unlock equity quickly. Our light refurb bridging loans offer up to 70% loan-to-value and can sit as a first or second charge. Terms are available between one and 24 months and the lack of exit fees or early repayment charges gives you total flexibility when it comes to repaying your loan.
If you’re interested in finding out more about our light refurb bridging loans, call us on 0203 051 2331 or send us a query online and a member of our team will be in touch with you shortly.