Recent analysis from Nationwide indicates that properties with higher Energy Performance Certificate (EPC) ratings command only a modest premium in the UK housing market. This finding is particularly relevant as the government moves towards stricter energy efficiency requirements for private rented sector (PRS) properties, aiming for all to meet at least EPC C by 2030.
Limited Price Impact of Higher EPC Ratings on Owner-Occupied Homes
Nationwide’s data reveals that owner-occupied homes rated A or B for energy efficiency attract a price premium of approximately 1.6% compared to similar properties rated D. This translates to an average increase of around £4,500 based on current English house prices. Interestingly, properties rated C or E show little to no significant price difference when compared to those rated D, suggesting that moderate improvements in energy efficiency may not strongly influence buyer valuations.
At the lower end of the spectrum, homes with the least efficient ratings, F or G, tend to sell at a slight discount of about 1.4%, equating to roughly £4,000 less than comparable D-rated properties. This suggests that while poor energy performance may detract somewhat from value, the market response remains relatively restrained overall.
Stronger Premiums Evident in the Buy-to-Let Sector
The buy-to-let market shows a more pronounced response to EPC ratings. Properties rated A or B in this sector attract a significantly higher premium, around 12.2%, indicating that landlords and investors may place greater value on energy efficiency improvements. This could reflect expectations of lower running costs, improved tenant appeal, or compliance with forthcoming regulatory standards.
This divergence between owner-occupied and rental markets highlights the varying priorities of buyers and investors. While owner-occupiers may weigh multiple factors such as location and property condition more heavily, landlords could be factoring in operational efficiencies and regulatory compliance when valuing properties.
Barriers to Energy Efficiency Improvements Among Homeowners
Despite growing awareness of energy efficiency, upfront costs remain a significant obstacle for many homeowners considering green improvements. Nationwide’s research found that over half of those who had not made energy efficiency upgrades cited affordability as the main barrier. Additionally, many homeowners do not plan to enhance their EPC rating before selling, indicating that financial considerations and long-term residency plans influence decisions.
Among those who have invested in green improvements, installing solar panels was the most popular measure. Younger buyers also tend to place greater importance on energy efficiency when selecting a property, suggesting shifting attitudes that may influence future market trends. However, the data suggests that most homeowners undertake improvements primarily for personal benefit rather than to increase resale value.
Calls for Greater Support to Facilitate Energy Efficiency Upgrades
Industry experts emphasise the need for enhanced government support to help homeowners fund energy efficiency improvements. The president of NAEA Propertymark has highlighted that while energy-efficient features such as solar panels and battery storage can make properties more attractive and reduce household costs, these factors remain only one aspect of a buyer’s decision-making process. Location, affordability, and overall condition continue to be dominant considerations.
Practical assistance, particularly to overcome upfront financial barriers, is seen as essential to encourage wider adoption of energy-saving measures. This aligns with government ambitions to improve the energy performance of the private rented sector, where landlords may also face challenges in funding necessary upgrades to meet EPC C standards by 2030.
What this means for landlords
Landlords should be aware that while energy efficiency improvements can enhance the attractiveness and potentially the value of rental properties, the premium commanded in the sales market may be modest for owner-occupied homes. However, in the buy-to-let sector, higher EPC ratings appear to be more highly valued, which could influence investment decisions and rental demand.
With the government’s proposed EPC C requirement for the private rented sector by 2030, landlords may need to plan for energy efficiency upgrades to maintain compliance and marketability. Understanding the cost-benefit balance of such improvements, including potential rent premiums and tenant retention benefits, will be important. Landlords should also consider the financial support options available and factor in the upfront costs when budgeting for property enhancements.
What TLA members should consider
- Review the current EPC ratings of rental properties and assess the feasibility of upgrades to meet or exceed EPC C standards ahead of 2030.
- Consider the potential for higher rental income and tenant demand associated with improved energy efficiency, particularly in the buy-to-let market.
- Explore available government schemes, grants, or financing options that may assist with the upfront costs of energy efficiency improvements.
- Communicate clearly with tenants about any planned energy-saving measures and how these may benefit them through reduced energy bills.
- Stay informed about evolving regulations related to landlord compliance and energy performance to avoid enforcement risks.
- Utilise resources such as the TLA Academy and legal support hubs to ensure compliance and effective property management strategies.
TLA Training Academy
The Landlord Association provides structured guidance, compliance education and practical support for landlords, letting agents and property professionals. Members can access training and resources designed to help them stay organised, informed and prepared.
Landlords can explore the Academy here: https://landlordassociation.org.uk/tla-academy/
Those looking to join and access member support can register here: https://landlordassociation.org.uk/get-started-with-the-landlord-association/
TLA update
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