Landlords invest in higher EPC-rated homes

A greater proportion of properties entering the rental market that were previously for sale have an EPC rating of C or higher, according to a recent survey.

The study by Rightmove reveals landlords are investing in higher EPC-rated homes to get ahead of potential legislation changes.

The latest government plans suggest that all rental properties should have at least an EPC C rating by 2028.

The proportion of properties entering the rental market with an EPC rating of A to C that were previously for sale has increased by 16 per cent since January 2019.

The proportion of rental properties entering the market with a D to G rating that were previously for sale has decreased by 11 per cent.

These findings are supported by a new Rightmove survey among landlords, where more property investors said they were avoiding lower EPC rated homes.

Nearly two-thirds (61 per cent) of landlords said they would not buy a property below a C rating, up from 47 per cent last year.

And a third (33 per cent) of landlords who own lower EPC-rated properties plan to sell them rather than make improvements to their EPC rating.

This is compared with 20 per cent, who planned to sell rather than improve last year.

The survey also showed that more landlords are aware of proposed changes to EPC legislation than last year, likely contributing to some of their decision making.

The study revealed that attitudes towards lower EPC-rated properties varied amongst landlords depending on how many properties they own.

Landlords who already own five or more properties are much more likely to plan to increase their portfolios over the next 12 months (27 per cent) compared to landlords who only own one property (10 per cent).

Landlords with bigger portfolios are also more likely to make improvements to their properties below a C rating before 2025, and be more willing to invest in a property with an EPC rating below a C than those who only own one property.

Tim Bannister, Rightmove’s property expert said: “Upcoming changes to EPC legislation is a growing concern for landlords, however the data suggests that many are getting ahead and focusing their investment on properties that will meet the new minimum standard and bringing these to the rental market.

“While some may sell up, those with bigger portfolios are more likely to be planning to carry out the necessary improvements to increase the EPC rating of their lower rated homes and are more willing to invest in lower EPC rated properties, potentially to improve for the future.

“This suggests there may be a changing of the guard over the next few years, with landlords with bigger portfolios buying up lower EPC properties being sold by landlords with smaller portfolios, to improve and then rent out again.”