Could we see yet another EPC U-turn?

As the political parties start to throw down the gauntlet with their election pledges, one to watch will be which direction – if any – each party takes on Energy Performance Certificates (EPCs).

I think it’s safe to assume we know which direction Rishi Sunak will take, given his backtrack over the EPC plans for landlords last year. There is a feeling in the market, however, that Labour could step in and reverse the plans once again.

The National Residential Landlords Association (NRLA) recently announced it is to run a retrofitting course for landlords this summer. In its announcement referencing last year’s U-turn, it says “a replacement scheme is expected to be announced.”

Perhaps it’s just hearsay, or perhaps it’s a hint that the EPC targets for landlords may not be long gone after all.

Speaking shortly after the Prime Minister announced last year that he would no longer require rental properties to carry a C EPC rating by 2025, we heard Ed Miliband, Shadow Secretary of State for Climate Change and Net Zero, condemn the move.

He was very clear about his party’s desire to keep the plans, saying in the House of Commons last October: “The cancellation of some Net Zero measures is likely to increase both energy bills and motoring costs for households.”

He went on to say: “These regulations would have reduced renters’ energy bills significantly. Moreover, the cost savings would have outweighed any changes in rent. Therefore, they are not lowering costs; they are raising them.”

A reversal of the EPC plans might have been a done deal, were it not for Labour’s scaling back of its £28bn green investment pledge earlier this year. Initially, under Labour’s Warm Homes Plan, there were ambitions to upgrade 19 million homes to EPC C or above by 2035.

However, at the start of the year, this was downgraded to only upgrading five million properties by 2030.

Given a large portion of landlords have already carried out the upgrades, some might argue that Keir Starmer wouldn’t necessarily face the wrath of landlords if he were to reintroduce new deadlines, given most landlords appear to have made the changes anyway.

Recent research from bridging lender Finbri found that over 70% of landlords plan to carry out EPC improvements on their rental properties this year.

The rental market surely can’t be ignored in political pledges, and rent caps would arguably be more divisive than reintroducing EPC targets.

An incoming new EPC?

Next year, we are also likely to see the way EPCs are calculated updated – certainly for new homes but also possibly for older stock. New guidelines are currently being consulted on, which could see the calculations used to assess the energy efficiency of properties change.

Properties are currently assessed under a Standard Assessment Procedure (SAP). According to the NRLA, the replacement Home Energy Model will use a new Future Homes Standard assessment, which will see assessors:

  • Measure all windows at the property, rather than relying on assumptions based on its age;
  • Carry out additional assessments of rooms in the roof;
  • Introduce a new age-band for properties built from 2023 onwards;
  • Take into account the use of power diverters and battery storage used in conjunction with solar panels;
  • Recommend the use of heat pumps more frequently.

The new system should eradicate any anomalies like the ones we have seen where a landlord has made improvements to their properties by moving them to electrical heating systems via a heat pump but have seen their EPC rating go down due to the way the rating is calculated.

An update to the EPC calculation is long overdue, so it is hoped that if the new scheme is introduced, it will lead to a clearer system for all. However, what would be unhelpful is if landlords who have already made the changes find themselves having to pay for a new inspection – which hopefully shouldn’t be the case given an EPC has a lifespan of 10 years.

At SDL we have our own nationwide team of accredited energy assessors, able to provide retrofit and energy reporting services to homeowners, lenders, and social housing landlords.

However, without set deadlines, the market is arguably not moving at the necessary pace to achieve the UK’s net zero objectives. There is a clear need for Government funding – or at least direction – to accelerate progress.

Reintroducing EPC regulations for landlords would bring us one step closer to reaching these targets.

Simon Jackson is managing director of SDL Surveying