One-third of homeowners “not convinced” that their properties can achieve the government-mandated EPC “C” rating

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More than a third of homeowners don’t think they can get a “C” energy performance certificate on their properties – a target that must be set for them by the government.

Currently, homes for rent in England and Wales must have an EPC rating of “E” or higher – but the government wants to increase the requirement to a “C” rating for all new rentals. by 2025, and for all existing leases by 2028.

With less than four years to go, a new study from lender The Mortgage Works found that 35% of 750 homeowners surveyed were “not convinced” that they would be able to meet the goal.

One-third of homeowners are not confident that they will be able to upgrade their properties to an EPC “C” rating. At present, only 2% of English households have obtained an “A” or a “B”

This was for a variety of reasons, from the age of their properties, to the cost of making the improvements, to not knowing exactly what work they needed to do.

However, one in ten was more optimistic, saying they didn’t plan on facing any challenges.

According to the latest UK housing survey, only 2% of homes in England currently achieve A and B ratings, while around 85% are either C or D. Around 13%, or over 14 million, are rated E, F or G.

Common green home improvements include improving insulation, installing solar panels, and replacing a gas boiler with a more sustainable alternative.

Of homeowners who thought they would have a hard time meeting the new requirements, 51% said “ownership constraints” would be a challenge.

One of the biggest complaints from homeowners and homeowners about energy efficiency goals is that it can be difficult or impossible to bring older properties up to standard, as they were built during a time when the energy efficiency was not a concern.

Victorian homes, for example, were not built with ventilation systems, meaning that walls easily absorb moisture and modern insulation techniques cannot always be used.

And in period properties with features like wooden floors and high ceilings, energy-guzzling drafts can be difficult to eliminate completely.

Owners with larger real estate portfolios were more likely to face these challenges than those with a smaller number of properties, possibly because their portfolios were more diverse.

Of those with more than 11 properties, 66% said they were concerned about property constraints while that figure fell to 49% for those with 10 or less.

About one in ten homeowners admitted they had no idea what work was required, but more (41%) had a clear idea of ​​what to do.

Energy efficiency rules “by far the biggest threat” to homeowners

When This is Money covered the new EPC rating targets for buy-lease earlier this year, many landlords reached out to tell us that they had no plans to upgrade their properties and that ‘instead they wanted to stop the buy-to-let.

One portfolio owner told us, “Of all the recent punitive legislation and anti-owner changes, nothing comes close to the looming minimum C rating.

“This alone will make me sell my rental properties, and I suspect a great number of others.

“My properties are old and as such it will take a ridiculous amount of money to hit a C, even if it were possible, which I suspect it won’t.

“This is by far the biggest threat to the buy-to-hire market and it is within sight.”

Lack of return on investment more worrying than initial cost, owners say

While almost two-thirds of homeowners said they would need to spend money to bring their properties up to standard, lack of funds to complete the work was only the tenth most cited concern among homeowners. with 27% of them saying it was a problem. .

The expected cost of the work varied considerably. More than one in ten (14%) said they would need to spend all of their annual rental income, or more, to make improvements to their properties.

However, a larger proportion of homeowners did not think they would need to spend that much, with almost a third saying they would need to spend less than 30 percent of their annual rental income.

Installing or upgrading roof insulation is one way to improve a property's EPC

Installing or upgrading roof insulation is one way to improve a property’s EPC

Perhaps a more pressing concern was whether they would see an increase in rents or other financial benefits, thanks to the money they were spending.

Forty-four percent of landlords were concerned that they might not get a return on their investment, perhaps because the improvements would have a “limited tangible benefit to tenants” (of which 35% were concerned), which means they won’t. could not substantially increase the rent.

Daniel Clinton, director of The Mortgage Works, said: “Given the concerns and challenges that homeowners face not only in making necessary improvements, but also in financing them, it is perhaps not surprising that more one-third of homeowners are not confident that they will be able to bring their properties up to the required EPC C standard. ‘

Housing and energy companies are calling on the government to pay homeowners to improve their properties and make them greener – which is reportedly under consideration – and Clinton said he hoped a similar support would be available to homeowners.

“It’s great to hear that the government wants to introduce a new financial support program to help people improve the energy efficiency of their homes, however, we hope that such a program would also be opened to help homeowners. meet their demands, ”he said. .

“Green” Mortgage Products Reward Those With Energy Efficient Homes

“Green” Mortgage Products Reward Those With Energy Efficient Homes

In addition to increasing rents, survey homeowners who significantly improved their EPC ratings would potentially be able to obtain more favorable terms on their mortgages.

Several lenders have launched “green” mortgages in recent months to reward those with an “A” or “B” rating – although this is often done by giving them a higher loan-to-value ratio or a discount on fees, rather than an interest rate.

Some also offer additional green products, which allow homeowners to take out an additional secured loan on a property to improve energy efficiency.

This includes The Mortgage Works, which launched its very first green advance earlier this year with a rate of 1.49%.

It is available to homeowners with an existing TMW mortgage and allows loans between £ 2,500 and £ 15,000 up to a maximum of 75 percent LTV. Rates for those making green improvements to their property are up to 50 percent lower than the lender’s standard additional advance rates.

Landlords also highlighted the issue of where tenants would stay during major renovations, if the landlord didn’t want to terminate their tenancy and leave them homeless.

In this survey, access to the property to carry out the work and disruption were among the top concerns, each cited by 44% of homeowners.

Meanwhile, finding the right people to do the job was also a problem. More than a third (34 percent) said they were concerned about finding “reputable” tradespeople, while 30 percent were concerned about their availability.

The upcoming change in EPC rating requirements is one of many changes that are causing many homeowners to consider leaving the industry.

The proportion of homeowners intending to buy new properties fell from 19% in the first quarter of 2021 to 14% in the second quarter, according to the NRLA.

In comparison, the proportion seeking to sell was 20 percent, up three percentage points from the first quarter of the year.

Much of this was due to the aftermath of the pandemic, which saw landlords grant vacations and rent cuts. Many believed that this would still have a negative impact on their businesses in the future.

The evolution of rental taxation in recent years has also prompted owners to leave the sector or to reduce their portfolio.

They can no longer deduct their mortgage interest from rental income for tax purposes, and they also have to pay a 3 percent stamp duty surcharge on the properties they buy.

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