If you’re a landlord with a property with an EPC rating of E or D, and want to get to a C, this blog post is for you.
Upgrading the energy efficiency of our housing stock reduces energy bills, improves the quality of life of those living in the properties, and is good for planet.
However, as I have been finding myself with an EPC E rated Victorian buy to let house, improving a property’s energy efficiency is very expensive. Few landlords can afford to pay for it all in one go. This means we need to make choices, and spread the cost over several years.
It feels daunting to be faced with improving a property’s energy efficiency from an E to a C. It’s difficult to know where to start, beyond the lightbulbs, as most advice online is too generic to be useful. Even the recommendations on the EPC certificates aren’t that helpful for older properties. And what private landlords can afford to put in solar panels or a heat pump?
This blog post will help you understand how to make the energy efficiency upgrades to improve your property to EPC Band C. Sharing advice from Chartered Building Engineer and EPC expert, Graham Kinnear, I include 5 practical tips to help you on your journey from an EPC E to EPC C.
Improving you EPC rating at a glance
What exactly is an EPC?
The EPC or Energy Performance Certificate was brought in by the European Union to make the energy efficiency of buildings more transparent and comparable. It’s a standard certificate that shows a property’s energy efficiency rating from A (most efficient) to G (least efficient).
To create an EPC, a qualified energy assessor processes information about the building, its heating, lighting, ventilation and air conditioning in government approved software, to produce a score. This score will come under one of the bands in the A to G scoring system. The score is dependent on what is inputted into the software, so it’s crucial the that the information is accurate.
As the EPC assessment is so important, this is not something to delegate. I recommend being there the assessment yourself, so you can provide the necessary proof of your improvements. Also check that an incorrect assumption about the thickness of the roof insulation isn’t made, just because the assessor doesn’t check the loft (see below). If this isn’t practical, then make sure the person you choose to be there has been fully briefed and has the supporting documents. Don’t leave it to your tenants to do.
The above image is from the EPC of my first buy to let, which I bought in 2019. It’s a mid-terrace Victorian house with a cellar. It shows the then current energy efficiency currently, as calculated by the software, and its potential for improvement.
Having a standard certificate theoretically makes it easy to compare the energy efficiency of all properties. This is particularly useful when you are buying a rental property, because it shows you the current rating. You’ll also be able to see some advice on how to improve its energy efficiency. It’s also helpful for renters, who are looking to keep heating bills down.
An EPC is valid for 10 years, although an owner can commission a new EPC at any time. Landlords often update an EPC after carrying out energy efficiency improvements. The EPC is one of the documents that landlords must give tenants before they move in. You also need to give them a copy of any replacement EPC certificate – they need renewing every 10 years. Without giving the tenants the EPC, the landlords can’t serve a Section 21 notice. That said, the EPC can be given to the tenant at any point before the section 21 notice is served. Click on my guidance on Section 21 for more details.
Why has the EPC rating become such a big issue?
With the rising cost of gas and electricity, energy efficiency has become increasingly important for renters and owner occupiers alike. This is stimulating demand for properties that are energy efficient, with an EPC rating of Band C, or better.
Alongside this ‘pull’ factor, is the ‘push’ factor of legislation on landlords and mortgage lenders, apparently due to be introduced soon.
This focus on energy efficiency is part of the UK Government’s commitment to fight climate change and achieve “net zero” carbon emissions by 2030. You can read more about this aspiration in the 2020 Energy White Paper: Powering our Net Zero Future.
What’s the current status of EPC laws for landlords?
Currently, domestic private rental properties in the UK must have a minimum energy efficiency performance of EPC Band E. There’s a cost related exception where the landlord is not required to spend more than £3,500 inc VAT on energy efficiency improvements. Click here for the government guidance on complying with the EPC E requirement.
The Minimum Energy Performance of Buildings Bill (2021 version)
This minimum standard is supposedly due to increase to EPC Band C for new tenancies from 31 December 2025. When I say “due” to increase, what I mean by this is that draft legislation called Minimum Energy Performance of Buildings (No. 2) Bill is at the early stages of progressing through parliament.
The Bill was supposed to have its second reading in the House of Commons in May 2022, but this didn’t happen. There’s been no update since then, leaving landlords in a state of limbo.
The Daily Telegraph published an article on 28 March 2023 speculating the date would be moved to 2028. However, there has been radio silence from the government since then.
Here’s an overview of the current wording in the Bill, as presented to the House in July 2021.
- All new domestic tenancies in the private rented sector must must have an energy efficiency performance of at least EPC Band C from 31 December 2025.
- All existing domestic tenancies in the private rented sector must be at least EPC Band C from 31 December 2028.
- All mortgage lenders must ensure that the average energy performance level of their domestic portfolios (rented and owner occupied) is at least EPC Band C, by 31 December 2030.
Will Landlords actually have to improve EPCs to a C by 2025?
Given the delays to the Bill, my personal view is that we can now take the 2025 deadline with a pinch of salt. Almost two years have passed since the Bill was presented to parliament, and it would be unreasonable for the government to insist on the 2025 deadline.
Consequently, I believe the deadline will be extended. The question is how much time will landlords have to make the improvements. Maye 2028, if you believe the Daily Telegraph. I’m certainly using the time to making more improvements to my EPC E Victorian house out of cash flow.
What should Landlords do about a Property with a D or E EPC?
Landlords are in a difficult position at the moment because of this legislative limbo land. There’s been no official news whether the government is going to go ahead with its plan to oblige landlords to upgrade their properties to EPC Band C. Some mortgage companies are already giving small discounts for properties with an EPC Band C or better.
61% of private rented properties do not have a rating of EPC Band C, according to government data. This is marginally higher than the figure for all housing in England, which is 58% (ONS). However, owner occupiers are not obliged to improve the energy efficiency of their properties, even to EPC Band E.
Government figures from 2020 estimate that the average cost of improving properties to EPC Band C is £7,737, but that around 10% would cost more than £15,000. Of course, with recent inflation, This is more than the average gross rent outside of London, currently around £14,250 per year (see Rightmove Q1 2023 figures). In any event, the government estimate will have increased because of inflation.
Even if Bill does keep the exemption for landlords who have spent £10,000, an investment of this magnitude would be beyond the reach of many.
Only 39% of properties in the private rented sector have achieved an EEP rating of C or above.
English Housing Survey Energy Report, 2020-21, p. 9
Although we’re in a state of limbo, it looks fairly certain that sometime this decade, all private rented properties will need to become EPC Band C.
I’m not waiting until we find out when the deadline will be. I decided to start slowly upgrading my Victorian house with an EPC E rating four years ago. Hopefully I’ll get there in 2023. Sure, upgrading to an EPC C is expensive. But phasing the upgrades over a long period has made it easier on the cash flow.
5 Tips to improve the EPC rating from Band E to Band C
The task of having to climb from EPC Band E to Band C is enormous. Very few landlords will be able to fund this out of free cash flow, unless they do it over a long period.
In order to try and make this section as practical and helpful as possible, I’ve picked the brains of two experts. Firstly, Chartered Building Engineer and EPC expert, Graham Kinnear of Graham Kinnear Property Consultants. Secondly, Thomas Conneely, gives the perspective of a fellow property investor. He’s a Chartered Surveyor and founder of East Twenty, a property investment and advisory company.
EPC Tip 1: Study the EPC’s breakdown of energy performance
The very first thing to do is to study the existing EPC for your property (or one you’re thinking of buying). You can download it using the government checker. It will have a breakdown of property’s energy performance, which states the assumptions and the score.
Here is the breakdown of the 2018 EPC for my Victorian rental property (score 48):
You should start with checking whether any of the assumptions are incorrect. Next, think about whether any of the problems ave been addressed since the date of the EPC.
Here, the assessor made the assumption there was no roof insulation. The word “assumed” means the assessor didn’t check, probably because they didn’t have a ladder with them. There was actually 100 mm of insulation in the loft, according to the previous EPC. Yet, neither the owner nor the managing agent who supervised this assessment noticed this big anomaly. Lesson: don’t rely on others! Check everything yourself!
When you look at the EPC, do note any quick wins, like the LED lighting, even if this will only improve the EPC by one point. However, one point is one point, and every point helps. It will also benefit your renters. As Graham Kinnear points out, it will reduce the electricity consumption on the lighting by up to 90%.
EPC Tip 2: Study the EPC’s tips to improve energy performance
This is the most useful part of the EPC. It shows how many points you may potentially get if you carry out each recommendation.
For this one, I knew the previous owner had replaced the old boiler with a condensing combi boiler, so I could take that off my to do list.
However, every building is different, and your priorities for your plan of attack will depend on what will give you the most points. You should also take into account what needs doing to your particular property. For instance, I insulated the suspended floor as the cellar ceiling had started to fall down and it made sense to add insulation when putting in the new ceiling. This cost me almost £3,000, including taking out the old ceiling and replacing the rotten wooden frame window with double-glazing.
In 2022, I replaced 3 small windows with double-glazing as they weren’t in good condition, at a cost of £1,500 including VAT.
EPC Tip 3: Think insulation
Graham Kinnear advises to start first with the insulation. Houses are in essence boxes, and “an EPC in broad terms measures the building’s ability to retain heat”. Anything you do to increase its ability to retain heat will help your EPC rating.
The easiest place to put insulation is usually the loft, unless it is boarded. Going from no insulation to 300 mm will increase the EPC score by around 8 or 9 points. Graham adds you will get little benefit from an EPC scoring perspective if you increase the insulation beyond 300 mm for existing buildings.
Solid wall insulation is very expensive, and very disruptive and messy if you go back to brick. But this will lead to larger savings on heating bills. Cavity wall insulation, on the other hand, for more modern houses is cheaper. Any sort of wall insulation is likely to have a big impact on the EPC rating.
Thomas Conneely explains there are some practical drawbacks to insulating walls. “It’s important to understand the walls are solid, so moisture has a harder time escaping and circulating in the air”. This means that landlords need to explain to tenants that they need to keep an eye on mould. This is particularly true if tenants use radiators or unvented tumble dryers to dry clothes with the windows closed. Or not putting on the extractor fan when having a shower. Landlords should explain this to their renters.
Graham Kinnear warns about the considerable upheaval to tenants if wall insulation is done when the property is tenanted. It’s better to leave back to brick work for when the property is empty. Get advice from an expert, as old walls still need to breathe and not trap condensation.
In 2022, I increased the loft insulation by 200mm to 300mm, which should get me a “very good”. This extra roof insulation cost £800.
As I mentioned above, I also took the opportunity to add insulation to the suspended floor when replacing the cellar ceiling, also helping the EPC rating. The suspended floor insulation itself only cost £150, but the total cost to take down and replace the crumbling cellar ceiling was £2,300, excluding the new window.
EPC Tip 4: Boilers and heating
Heating systems are the foundation of a property’s EPC rating. If your existing boiler is the old fashioned type with a hot water tank, replacing it with a modern condensing combi boiler will considerably improve your energy efficiency rating.
The new boiler also needs to be programmable with a thermostat. Thermostatic radiator valves should be added to at least 75% of the radiators. You can get extra points if your property has different zones, with different thermostats. For instance, one for living space downstairs, and the other for the bedrooms upstairs.
Surprisingly no extra points are given for a smart thermostat, such as a Nest Learning Thermostat. However, if you’re putting in a new boiler, it makes sense to put one in. I have them in all my rental properties. They’re very popular with renters, as they give them full control over the heating from their phone. It also shows them that their landlord is looking after their interests.
EPC Tip 5: Double glazing
Installing double or secondary glazing is very costly, and has a lower impact on the EPC than installing insulation per £ spent.
For my EPC, the rating for the windows came out as “poor” because it was only partially double-glazed. Also, the EPC states that the rating would improve a mere 2 points if I installed double-glazing in the rest of the windows. Replacing the windows should be a lower priority than increasing loft insulation, because of the cost. It’s also possible to replace the windows gradually, starting with the ones in worst condition.
Last year, I decided to replace the 3 small windows in my Victorian buy to let that need replacing anyway. The frames had started to rot, and it was time to do something about it. These 3 small windows cost £2,000. This just left the main front elevation to do.
After a bit of shopping around, I’ve decided to take the plunge this year. I’m going to replace the front elevation windows shown in the image with six double-glazed UPVC windows. The cost is a little over £4,000. Why six windows? The bay window itself has four separate windows.
I’m hoping this will be enough to get an EPC C rating for this Victorian house.
Final thoughts on improving an EPC
Increasing the energy efficiency of a Victorian house from EPC Band E to a C is possible, but expensive. Clearly improving the insulation will make the biggest difference to the EPC rating, in relation to its cost.
Knowing what I know now, I personally wouldn’t buy another house with an E rating, without a considerable price reduction.
I would however consider buying a house with a D rating, but it would depend on what needed doing. If it’s just insulating the loft and replacing the boiler, it’s not so bad. I’d treat that cost as part of the cost of purchase in my calculations.
If you’re buying a property with an EPC Band D or E, you should include the cost of upgrading it to Band C in your refurbishment budget. I would also carry out the work before renters move in.
As the EPC rating is so important, I urge you to be there for the assessment. Take a ladder with you, so the assessor can check the loft. Also, bring the receipts and certificates with you as evidence of any hidden insulation in the walls and cellar ceiling.
Around 60% of property in the private rented sector have a D or E rating. It wouldn’t be surprising if large numbers landlords sell up if legally compelled to spend up to £10,000 on upgrading to EPC Band C. This would reduce the supply of rental property even further. But that’s a subject for another day.
Finally, the current state of legislative limbo makes planning very difficult for landlords. More than two years after the close of the consultation on EPCs, there is still no news if or when the requirement for an EPC C will become law. The government has not given guidance to landlords about decarbonisation, which would mean replacing gas boilers.
Watch this space – I’ll keep this blog post updated.
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