Landlords drive energy efficiency performance in the private rented sector

By Bridging Loan Directory 28th February 2023

Landlords in the private rented sector have driven a 165% increase in the number of homes with an Energy Performance Certificate rating of A to C in the past decade, as part of a wider improvement of standards across the sector, Paragon Bank analysis has found.

Government data reveals 1.925 million rental properties in England have an EPC rating of A-C, an increase of 1.2 million compared with 2011, with the sector boasting a higher proportion of homes in the bracket compared to owner-occupation.

Paragon’s new report, Raising the standards of privately rented property, highlights that 44.5% of PRS properties are rated A-C, compared with 42.9% in the owner-occupied sector.

Landlords have been investing in homes that benefit from increased energy efficiency in anticipation of proposed Government legislation on minimum A-C requirements, as well as cheaper running costs typically associated with more energy efficient homes.

Paragon reported a 44% increase in lending against A-C-rated rental property in its last financial year to £832.2 million.

Under the Government’s proposals, properties let under new tenancy agreements must be rated EPC A-C from 2025 and all tenancies from 2028. However, it is over two years since the proposals were put forward and the industry awaits an update from the newly-formed Department for Energy Security and Net Zero.

If all properties were to be upgraded by the proposed date of 1 April 2025, approximately 3,130 homes would need to be upgraded to EPC C per day. That rises to 4,500 if only working days are included.

The improvement in the energy rating of PRS homes is mirrored by a broader increase in standards across the sector.

In 2008, 44% of homes in the sector were defined as non-decent according to the Government’s English Housing Survey. Today, that figure stands at 23%.

The addition of good quality homes has diluted the presence of poorer stock; In 2008, 1.8 million privately rented homes were classed as decent, rising to 3.3 million in 2021 – an 83% increase.

There has also been a reduction in the number of properties classed as non-decent – falling from 1.4 million to 990,000, a 29% reduction.

Richard Rowntree, Paragon Bank Managing Director of Mortgages, said:

“The private rented sector is too often associated with poor quality housing and that is simply incorrect.

Landlords have driven an improvement in standards in recent years, which is reflected in the increase in energy efficient rental property.

However, landlords and the broader industry that serves the private rented sector now need more clarity on the Government’s proposals for minimum levels of EPCs.

It is over two years since the Government’s consultation closed and the vacuum of information or direction since has created uncertainty and confusion.

We believe the timescales as they are currently proposed are unworkable as the infrastructure to support the upgrading of over 2 million properties in such a short window does not exist.

The good work of landlords in providing quality homes to millions of tenants should be recognised and celebrated.

However, a sludge of property still fails to meet the required grade and we would urge Government to support Local Authorities in weeding out poor quality property and landlords that aren’t up to scratch.

Paragon supports the Government’s aims set out in the Renters Reform Bill to raise the standard of property and to introduce a property portal to ensure information is available to all. A more transparent market will be to the benefit of tenants, landlords and lenders.”