"The side effect of these concerns is that a significant number of landlords admit they are ready to give up and already considering selling properties."
The survey from The Mortgage Works (TMW) found that 52% of impacted landlords have thought about selling some or all of their properties because they don’t think they’ll be able to either complete or finance the works need to get their properties up to the required standard.
Current legislation in England and Wales requires buy-to-let properties to have at least an EPC rating of ‘E’ or above. However, in order to improve the energy efficiency of rental properties, the government wants to increase the requirement to a ‘C’ rating for all new tenancies by 2025 and for all existing tenancies by 2028. Residential properties account for around 20% of all UK carbon emissions.
As a result, the TMW poll of more than 600 landlords highlights that those with larger portfolios are more likely to have considered selling some or all of their affected properties, with 58% of those with between six and ten properties admitting they have done so, rising to nearly two thirds (63%) of those landlords with 20 or more rental properties. Landlords with just a few properties are least likely to have done so – with just a third of landlords with just one property saying they have considered selling their property.
35% of landlords with just one property say it is rated between EPC-D and EPC-G, meaning they will need to undertake retrofitting work to hit the required standard. However, more than a half (52%) say they their property already meets the proposed energy-efficiency requirements.
Those with four or five properties say they have an average of around two properties that need work. This increases to four homes for those with 6-10 properties, seven for those with 11-19 properties and 12 for those who have 20 or more properties.
When asked what improvements needed to be made to improve the property, a third of landlords (33%) were in the dark. For those that did know, 37% said they needed to fit traditional insulation, while a quarter (25%) need to upgrade the boiler, with a similar number (24%) saying work involved upgrading existing utilities.
The more properties that landlords have in their portfolio, the more likely it is that they will need to undertake green remedial work. 59% of those with 20 or more properties say they’ll need to fit traditional insulation, while more than a third (37%) will need a boiler upgrade.
Landlords have an average of £15,579 set aside to cover unexpected costs with their rental properties. However, more than half (51%) have less than £10,000.
Although landlords with multiple properties have a larger sum set aside to deal with unexpected costs (£35,202 for those with 20 or more properties), the average amount they have per property is actually less than those landlords who have just one or a small number of properties.
Daniel Clinton, head of lending at The Mortgage Works, said: “With currently less than four years before all new tenancies need to be in properties rated EPC-C or above, there are still landlords who need to undertake remedial work on at least one of their properties. They are therefore understandably concerned about how they will both fund the work, find someone to do it and have it completed in time.
“The side effect of these concerns is that a significant number of landlords admit they are ready to give up and already considering selling properties. An unintended consequence of this sentiment could result in a backwards step in meeting the Government’s target around climate change, for example, if these properties are taken up by the owner occupier market, where there are currently no minimum energy efficiency requirements. Working with the sector to understand how best to help landlords improve the energy efficiency of their properties and the timeframe within which they can do this may ultimately lead a better outcome for everybody.
“Financing is also key and while our research suggests landlords have money set aside to deal with unexpected costs arising from their properties, it may not be enough to also cover the energy efficiency improvements. That is why The Mortgage Works launched its Green Further Advance earlier this year, giving landlords access to funding at a lower interest rate than they would get on a standard further advance and helping reduce the upfront cost facing landlords as they try to meet the government’s deadline.”