Should Southampton Landlords be worried about these new rental regulations?

 

Everyone should be doing their bit to help reduce the UK’s carbon footprint on the globe – yet the question is, is that burden being put too much on the shoulders of Southampton landlords with potential bills of £7,600+ in the next four years?

The background - the UK has obligated itself to a legally binding target to be carbon neutral by 2050. One of the biggest producers of greenhouse gasses is residential homes.

To hit that carbon-neutral target (as one-fifth of the UK's carbon output comes from residential property), every UK home will need to achieve a minimum grade of ‘C’ on their Energy Performance Certificate (EPC) by 2035. Each EPC has a rating between ‘A’ and ‘G’ - 'A' being the best energy rating and 'G' the worst – like an energy rating on a fridge or washing machine.

All UK rental properties are required to have an EPC. Yet, from April 2020, the Minimum Energy Efficiency Standards (MEES) regulations have required all private rental properties (including rental renewals) to have a minimum EPC rating of ‘E’ or above.

Yet new legislation being discussed by the Government’s Climate Change Committee has suggested that landlords should play their part and increase the energy efficiency of their private rented homes. Sounds fair until you dive into the details.

The Government is muting the idea that all new tenancies (i.e. when a new tenant moves in) in private rented properties should be at an EPC rating of 'C' or above by 2025 (and all existing tenancies by 2028). The issue is …

57.33% of all private rented properties in Southampton have an EPC rating of ‘D’ or below.

 

The problem is some Southampton landlords will find it very expensive, neigh impossible, to improve the energy efficiency of their Southampton rented properties, especially those Southampton landlords who hold older housing stock such as terraced properties built in the 1800s. These Victorian terraced houses never perform well on EPC ratings as they have solid walls. 

Now, of course, you can improve the EPC rating of a terraced house by improving roof insulation, boiler replacement, solar heating, and high-grade uPVC windows. Yet, with some terraced houses, there will come the point where you will be unable to get to the haloed 'C' rating without installing external or internal wall insulation, sometimes even floor insulation.

With wall insulation costing between £5k and £15k and floor insulation around £5k …

the bill to improve all Southampton’s private rented properties will be a minimum of £108,044,880.

 

But before I talk about what the options are for Southampton landlords, here’s the weird part of EPC’s. An EPC rating is calculated on the cost of running a property and not the carbon output or energy efficiency, despite its name.

My advice to Southampton landlords - although it’s correct to create a future strategy, all I can say at this point is 'more haste less speed'. These rule changes are only a discussion paper, and it remains open for consultation by any member of the British public until 30^th December 2021. That means the Government's strategies and tactics may change.

Given that 57% of private rented properties are below a ‘C’ EPC grade, it is hard to believe the Government could achieve this without making big cash grants available.

 For example, there is presently a cap of £3,500 for energy improvements that Southampton landlords have to spend to get it to the existing EPC ‘E’ target grade on private rented homes (i.e. if you have a privately rented home at an 'F' or 'G' EPC rating, you only need to spend a maximum of £3,500 as a landlord on improving your EPC rating and still being legal even if those £3,500 don't get you to the current 'E' rating minimum). So, if the current rules allow an exemption to the EPC renting rules, if a Southampton landlord can’t improve their Southampton property enough, conceivably, could this be extended?

So, what are Southampton landlord’s options?

One thing you could do is put your head in the sand and hope it all goes away!

Another thing some savvy Southampton landlords do (be they my client, clients of other letting agents in Southampton or even self-managing landlords) is to sit down and plan a strategy for their Southampton rental portfolio. I print off all the EPC’s of their rental portfolio, look at the recommendations, then discuss a plan to ensure they are covered whatever the Government decides to make the new EPC rules. Like all things in life, plan for the worse and hope for the best.

If your agent isn't offering that service, please drop me a line because I would hate for you to miss out on the advice and opinion that so many Southampton landlords have already had from me. The choice is yours.