When should I do works to Get towards an EPC Grade C
WHEN SHOULD I DO WORKS TO GET TOWARDS AN EPC GRADE C?
If you have been a landlord for any length of time you will know that it makes sense to do the works to upgrade the energy efficiency of your property whenever the opportunity presents itself.
So, if the frames around the old single glazed windows are looking worn out, rather than repair and repaint, you will likely, at some point have decided it is a wise move to upgrade to double glazing. And, of course, providing that the replacement is like for like, (i.e. you are not adding more windows), then the cost of the work can be set off against rental income for income tax purposes.
No doubt too, you will have ensured the loft is well insulated and if you have gas, the boiler has been upgraded to a condensing combi one.
Basically, you have been upgrading the property whenever you can and when it is cost effective to do it. You have ticked the boxes as you have gone along.
And with good reason too, because from 2026, any property you let will need to be at least an Energy Performance Certificate (EPC) grade C for all new tenancies you grant. From 2028, this rule will apply to all existing tenancies too. The government says it wants all homes to be grade C by 2035. Landlords are just the guinea pigs – and yes, of course, there are the obligatory heavy fines that will be levied on any landlord who dares to let out a property that does not comply.
But even when you have done all these basic and obvious things, if you have a typical Victorian or Edwardian era property, you may find you are still a long way off getting a property up to an EPC “C” grade.
Around 70% of privately let properties are worse-rated than an EPC grade C, which is not because landlords have been slow to improve the insulation and efficiency of energy use, it is more a reflection of the fact that they own a lot of the types of property that are inherently poorly insulated because of how they were built. (Victorian and Edwardian homes are usually single skin construction with no cavity walls. Landlords tend to own a lot of these).
Improvements are not cheap and many yield tiny cost savings. For example, installing external or internal wall insulation can costs from £5,000 to £15,000 and save you just £250 a year. Floor insulation will cost around £5,000 and save you only £35 a year. Yippee!
And if you did both of those things, my expert assessor says this might only get many properties from a low E to a high E. The low savings on heating bills explains why I have only met one tenant in my entire career as a landlord who expressed any interest in the EPC rating.
One of the key problems here is that EPCs currently only measure the cost of heating and lighting a property. They do not look at carbon output or energy efficiency anyway, an obvious failing.
Gas is cheaper than electricity currently and may be for some time to come, so if you have switched to using electricity to heat your home, as the government now wants us to do, then the current system will hurt you – and give you a low score.
Right now, there is a spending cap of £3,500, but the new cap that’s been recommended is £10,000. So, only if you have spent that much on energy improvements and still cannot get a property to the hallowed E grade, an exemption to the rules is allowed to be made.
Some hope that these rules could be extended or else the government will suddenly find a lot of landlords selling and a lot of tenants are unable to find rented accommodation. And if landlords sell up to owner occupiers, the problem of low energy efficiency properties is just kicked down the road a few years.
OK, I know there is vague talk of caps and grants possibly being available for certain types of upgrades, but nothing has been published yet – and timescales are getting short.
But I am not that confident there will be much cash help forthcoming anyway.
With the “Convid Debt” we all now owe, (yes, I deliberately mis-spelt that and stuck an “N” in there), I am not sure there will be cash in the government coffers for much in the way of help via grants, especially for individual private landlords.
The government has always seemed to be far keener to encourage big corporate and institutional investor-landlords rather than us private landlords. I cannot see that changing and the Great Reset hardly seems to be about small business.
In fact, I think we could see the cost of some improvements being classed as “capital costs” – meaning expenditures we make cannot be reclaimed until a property is sold, rather than being a “revenue item” which can be set off against revenue in the current year for income tax purposes. Setting costs as capital costs would not be a good outcome as it may be a long time before you sell.
It is hard to predict what is coming down the track on this.
If one leaves it too late to effect improvements, then one will be in a rush to get works done just when there will be a lot of demand from other landlords all trying to do the same thing. People who I know who have the potential to get heat pumps installed have told me there are virtually no experienced, available installers who can come to do the work. They cannot even get people in to give a quote. A salutary lesson, perhaps?
If one goes too early and does a lot of improvements now, maybe the government may later see sense and consider that hundreds of thousands of landlords selling up because the costs of getting to a grade C EPC rating are too high, could create problems of homelessness. So, maybe this could lead to the government perhaps accepting a grade D?
I am not sure. I cannot see the governments of the world having a change of heart on this, even if the next Antarctic Winter turns out to be as cold as the last one.
My suggestion is to get as much of the lower cost insulation jobs done when you can and keep an eye on this story.
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