Landlords face a 26 year wait to recover costs of mandatory EPC Upgrades

New research indicates landlords could wait over 25 years to recover costs of mandatory energy efficiency upgrades.

The study by London lettings and estate agent Benham and Reeves reveals significant financial implications of the Labour government’s proposed energy efficiency regulations.

Labour plans to enforce a minimum Energy Performance Certificate (EPC) rating of C for all private rental properties by 2030.

This target, aimed at improving housing energy efficiency, comes with a high cost.

Previous research estimated the total cost to landlords for upgrading all UK properties would exceed £21bn.

Benham and Reeves found the average cost of upgrading a single buy-to-let property to an EPC rating of C or above in England is £7,396.

With projected annual energy bill savings of £280 at current prices, landlords face 26.4 years to recoup their investment.

London landlords face 31.7 years to recoup investment.

The situation is more challenging in London, where landlords face the longest wait for returns on EPC upgrade investments.

With an average upgrade cost of £7,807 and expected annual energy bill savings of £247, London landlords could take 31.7 years to break even.

Marc von Grundherr, Director of Benham and Reeves, expressed concern over the potential impact on the rental market.

“Since taking power, our new Government has launched initiatives designed to win the tenant vote without much thought for the wider rental market. Plans to make EPC requirements of a C mandatory are another example of this,” he said.

Von Grundherr added, “Requiring landlords to make such a large investment for a marginal improvement is likely to deter investors.”

The research shows regional variations in cost recovery time.

After London, landlords in the East Midlands face the second-longest payback period at 30.8 years, followed by the North East at 29.8 years.

Even in the South West, where annual energy bill savings are highest at £365, landlords still face a 22.5-year wait due to high upgrade expenses.

Von Grundherr highlighted additional concerns:

“Current plans provide no guarantee that work will improve an EPC score. Considering the lack of tradespeople and their high prices, many landlords may reconsider their future in the sector.”

The potential consequences extend beyond landlords.

Von Grundherr warned, “Those who remain will likely pass costs incurred in meeting an EPC C rating onto tenants through higher rent, worsening rental market affordability.”

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