Energy Performance Certificate (EPC) ratings are increasingly influencing rental values across the UK’s private rented sector (PRS), with more energy-efficient properties commanding higher rents. However, industry experts caution that the government’s EPC improvement targets must be realistic and supported by adequate funding to avoid unintended consequences for landlords and tenants alike.
Rising EPC Ratings in the Private Rented Sector
Recent data from The Mortgage Works highlights that EPC ratings are a significant factor in determining property values and rental levels. Over the past decade, the proportion of private rented homes rated between EPC A and C has doubled, now standing at 51%, compared to just 25% ten years ago. This improvement is largely attributed to the influx of newly built properties, which typically achieve higher energy efficiency ratings, with approximately 97% rated C or above.
Geographically, the North of England has seen the most pronounced rental premiums linked to EPC ratings. Properties rated A or B in this region attract a rental premium of 13.3% compared to lower-rated homes. Nationally, an A or B rating commands an 8.1% higher rent than a comparable D-rated property, up from 7% in 2024. This trend underscores the growing financial benefits of investing in energy-efficient homes.
Challenges of Meeting EPC C Targets by 2030
The government has set a target for all private rented properties to achieve at least an EPC C rating by 2030. While this ambition aims to improve energy efficiency and reduce carbon emissions, the Association of Residential Letting Agents (ARLA Propertymark) stresses the need for realistic expectations and adequate support for landlords.
Megan Eighteen, President of ARLA Propertymark, emphasises that although progress has been made, particularly with newer properties, the sector faces significant challenges in upgrading older homes. “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,” she explains.
Older properties, especially those built before 1919, require substantial investment to meet EPC C standards. The Mortgage Works estimates that upgrading a pre-1919 property to band C costs around £10,700 on average, based on 2024 figures. In contrast, more recent properties constructed between 2003 and 2013, currently rated D to G, typically need less extensive work, with average upgrade costs around £2,500.
Importance of Realistic Targets and Funding
Megan Eighteen warns that without proper funding and clear guidance, landlords may reduce investment in energy efficiency or even exit the rental market altogether. “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,” she says.
Such a scenario could lead to a reduction in the number of rental homes available, further exacerbating affordability issues for tenants. The regional variations in property values and upgrade costs also mean that some landlords, particularly in higher-value areas, may find it harder to justify the upfront expenditure required.
What this means for landlords
Landlords should be aware that EPC ratings are becoming a key factor in rental pricing and tenant demand. Investing in energy efficiency improvements can enhance rental income and property value, particularly in regions like the North of England where premiums are highest.
However, landlords of older properties face significant costs to meet the EPC C target, and should plan carefully to manage these expenses. Engagement with industry bodies and government schemes offering financial support will be crucial to navigating the upcoming regulatory changes without compromising investment returns or market participation.
Source: Based on reporting from Property118
TLA Training Academy
The Landlord Association has launched its new Training Academy for UK landlords, providing structured guidance, compliance education, and practical knowledge to support landlords at every stage. Members can now complete the programme and become TLA Certified Landlords at no additional cost as part of their membership.
Landlords can explore the Academy here: https://landlordassociation.org.uk/tla-academy/
Those looking to join and access the full training and certification can register here: https://landlordassociation.org.uk/landlord-association-membership-uk/
TLA update
The Landlord Association is currently onboarding new service providers into its Trusted Partner Hub, a new initiative designed to support landlords, tenants, letting agents, and property managers with vetted, high-quality services. As one of the fastest growing landlord associations in the UK, TLA offers partners direct access to an engaged and active member base at the point of need. Service providers across legal, maintenance, insurance, finance, mortgages, tenant screening, and property services can register their interest here: https://landlordassociation.org.uk/become-a-tla-service-partner/
Source: www.property118.com
TLA - The Landlord Association