There is now talk that EPCs need to be totally reviewed (says the Department for Business, Energy and Industry Strategy) as a rather interesting anomaly has come to light.
What are EPCs?
Energy Performance Certificate. They measure the energy efficiency of a building. They were introduced in 2007 and have been the way tenants could get an idea of how much it would cost them to heat the home. Since 2018 it has been illegal to rent out a home with a banding E or F.
Why are EPCs important?
In 2025 or possibly 2026 (depends what you read…), there are plans in place to make the minimum banding a C for all new tenancies and all tenancies by 2028. There is also consultation happening within the sales market, in that mortgages will be hard to obtain on lower rated properties. At the moment everything is in discussion and there is currently no legislation that will mean this will happen. However, given that the government wants to reduce our carbon footprint, something will definitely happen on housing stock.
What’s the issue now?
It has come to light that installing a heat pump could make some properties appear less energy efficient than more. Replacing a traditional gas boiler (which are to be phased out by 2035) with a heat pump, under some circumstances could make some properties appear less efficient.
How do they work that out?
The chairman of the Net Zero Scrutiny Group has said that as heat pumps increase the energy use, on which EPC certification is derived, they could push a property that might have been rated C under an old method into D. This can happen as an EPC is based on an estimate of what it costs to heat a home, rather than the carbon emissions generated. So although heat pumps definitely produce less CO2 than a gas boiler, they are not known to be cheaper to run.
And the elephant in the room is?
60% of homes in England and Wales have an EPC of D and below. However, it is estimated that 23% of rental stock in England and Wales comes into this category. No doubt this one will run and run as basic increasing of the insulation or changing to low energy light bulbs in 19th century homes isn’t going to make a huge difference.
What you need to be thinking about
As mentioned, nothing is written in stone but changes are going to be coming down the road. So here are some tips on how you can make your portfolio more energy efficient.
- If expanding your portfolio now make sure you buy homes with ratings of C or above.
- The highest volume of heat loss is through the walls and roof of a property, so by insulating first, it means that any heat generated is retained within the property for longer.
- Make sure that next time you have an EPC carried out (they last ten years), you change to energy efficient light bulbs.
- Make sure the insulation in the roof is good. It is expected that grants will be available from April 2022 to help with the cost. Although, in saying that, any grant system to help landlords improve their portfolios in the past, has never been that great.
- Review your EPC to see what will make the difference and plan for the works over the next few years.
- If you have a period property, as now, exemptions will be given – we just don’t know what they are at present.