New EPC Consultation

The Government has published a new consultation entitled "Improving the energy performance of privately rented homes". This is described as a 2025 update to the previous consultation held in 2020. In case you have been entirely focused on the Renters' Rights Bill (who wouldn't be!) this consultation is about requiring all properties in the Private Rented Sector to reach a higher energy performance standard. At the moment under Minimum Energy Efficiency Standards (MEES) domestic rented properties much reach a minimum standard of EPC grade E.

While there has been a lot of talk about reaching EPC grade C that is not exactly what the government is seeking. They are actually planning to substantially re-tool the entire energy efficiency framework, building on ideas worked on under the previous government and advanced in a consultation which started at the end of last year.

The proposals are complex and I am nowhere near qualified to explain them but the summary is that the government wants to move away from a simplistic, and often inaccurate, letter code which tells you what it should cost to heat and light the property and towards a series of metrics measuring key performance indicators. The metrics that the government is looking for landlords to meet are one set against what is called the "fabric performance metric" and one set against either the "heating system metric" or the "smart readiness metric".

There are good reasons for this. A property with lots of solar panels might get a very good EPC rating even though it is very poorly insulated and is draughty and hard to heat. It might not cost a lot but the rating would be a poor reflection of energy efficiency.

The fabric performance metric, as you might expect measured the insulation condition of the property and its thermal properties. Basically, the insulation and heat retention of the property. The heating system metric measures how good the hearting system is, how efficient it is, and its environmental impact. The smart readiness metric measures the ability of the property to integrate new smart technologies and the ability of a tenant to take advantage of cheaper smart tariffs. The government openly admits that the net effect of its new metrics is not dissimilar for most landlords to meeting EPC grade C but the way in which they get there is different.

The new standards are intended to apply to new tenancies from 2028 and all tenancies from 2030 so there is not a huge amount of time to get this done.

The government thinks that most landlords will need to spend around ￡6,500 to meet the new standards. But they are proposing a cap of a spend of ￡15,000. This will allow for a ten year exemption to be registered once that has been spent. Presumably, at that point the expenditure will need to be paid out again and a new exemption registered. This figure is higher than the ￡10,000 proposed in 2020 and the government is asking which cap should apply. One of the things the government is clearer about, which has been unclear before, is the the proposed ￡15,000 cap is to be inclusive of VAT and so, in a sense is actually a lower figure. However, given that the expectation is most landlords will only have to expend around ￡6,500 a cap of ￡10,000 is going to pick up most properties and moving to ￡15,000 really just generates a diminishing return for more and more money.

Annoyingly for landlords the costs cap is not intended to kick in until 2026 and so landlords should avoid spending any money before then. There is inevitably a chilling effect for landlords therefore for the next 12 months as there is little motivation to do any work at all at this stage.

The consultation is open until 2 May and their is an online response form.