80% of landlords have already carried out some remedial works to properties in response to the new energy efficiency requirements, and in anticipation of future government measures and action in this area.
Of those, 52% said they had carried out works at the minimum cost required to comply, while nearly two in five (38%) said they had carried out works to maximise the long-term value of their property. The research also revealed there has been a drop in the number of landlords saying they would not carry out any works and seek to sell or not re-let – down to 13% from 20% in the last quarter.
Landlord owners were also asked how many currently owned a property below an EPC level of E, with 19% saying they had one or more in this bracket, while 78% said all their properties were above E, and 3% didn’t know the EPC rating of any of their properties.
The results come from the latest Q1 2023 BVA BDRC Landlord Panel research report and continue to show a landlord community increasingly engaged with the EPC levels of their properties, how they might improve them if necessary, and how they might fund any works.
The research, comprised of 683 online interviews with landlords, was undertaken on behalf of Foundation Home Loans, the intermediary-only specialist lender, between March and April this year.
It also asked what methods of funding landlords might use to carry out any work, with 76% (up from 62% last quarter), saving they would use savings, 26% said they put up rent to cover the cost (down from 30%), a static 19% said they would seek a Government grant or funding, 10% would take out a mortgage (up from 8%), and 10% would take out a loan (the same figure as the last iteration).
There is further positive news in terms of a marked increase in awareness of the anticipated future EPC level requirements, now believed likely to be a minimum level of C and above for all rented homes by 2028.
Although this has yet to be officially confirmed, the research revealed 85% of those surveyed were aware and fully understood the details, up from 65% in the last quarter of 2022, while 12% said they were aware and didn’t understand it (down from 25%), and only 3% were not aware at all (down from 9%).
George Gee, managing director (commercial) at Foundation Home Loans, said: “These latest survey results around EPC levels, landlord understanding and action, show a clear intention by the vast majority to ready their properties for future measures and Government legislation, and a positive intent, particularly when it comes to staying invested and not selling up if the property is not currently at the required level.
“Awareness and understanding of the EPC requirements is on the up, and I suspect this has much to do with the concerted information campaign our industry has been involved with, drawing attention to this issue and what landlords may have to do for those properties that do not currently make the EPC grade.
“It is interesting that – at the moment – there is a clear suggestion from landlords they are going to fund any remedial works required via savings. Indeed, 80% have already carried out some work already. However, while the majority will fund the work from savings, some landlords may need to raise additional funds from their rental property by way of refinancing.
“If that is the case, and we have a large number of portfolio landlords needing to fund works across a much broader range of properties, then it may well be they look to their mortgage and/or other loans in order to meet these costs.
“Clearly, advisers are already having conversations with landlords right now about their EPC levels – hence the increase in awareness – but it’s also important these conversations do not stop.
“If, as the rumour mill suggests, the measures will be total EPC level C and above compliance by 2028, it may seem like too far away to talk about anything deep and meaningful. But, the obvious point to make here is if you are having finance conversations now, and if there’s an opportunity to carry out work early and secure the finance to cover perhaps an entire portfolio now, then there’s no need to hold back and wait.
“Foundation is not just fully focused on the buy-to-let market as a whole, but also on providing Green product options with incentives to those landlords who get their properties above an EPC level of C right now. We’re here to support and help advisers who are walking their landlord clients through all their options and are looking to set themselves up for the long-term, so please make the very best use of us.”
