There’s no doubting that information on Energy Performance Certificates (EPCs), their increasing importance, and what that specifically means for landlords and their properties, has grown in recent weeks and months.
Certainly, as an industry, we appear to be doing far more in this area, in terms of information gathering, research and highlighting what the regulations are going to require of landlords and their properties before the changes that will come in from 2025.
In a very real way, the mortgage industry seems to be ahead of the curve with EPC standards in a way not always seen in response to government initiatives.
At least that is my sincere hope because some of the ongoing research into this area appears to support somewhat different sides of this story at present.
For instance, on the same news site within a week, we had a story suggesting landlords are adapting well to the incoming EPC requirements and a week later we were told that an ‘alarmingly high number’ of landlords aren’t even familiar with what is coming over the horizon, let alone doing anything about it.
I suspect that the truth actually falls somewhere between the two and that, the positive in all of this, is the ongoing focus on what is required and the highlighting of the timescales over which landlords will have to get their properties up to the EPC C level benchmark.
For what it’s worth, we – like many lenders in this space – have been looking at our back book of loans and the current EPC levels of those properties within it, and it is actually heartening to see just how many either already have a C or above rating, or are actually not too far off one.
That, in itself, is important because it means – at least theoretically – that it shouldn’t take too much in the form of upgrading to get those EPC levels raised to the requisite standards for ongoing tenancies. One of the ‘fear factors’ in this is that landlords will either leave it too late, or will face considerable bills for rectifying work on large numbers of properties.
What we clearly don’t want to see is landlords believing the cost of any work is going to far outweigh the profitability of them continuing to offer properties into the PRS. Tenant demand for rental properties already outstrips supply by some distance and we don’t want this to be exacerbated by landlords exiting the market as a result of not getting EPCs to the required levels.
Clearly, from both a lender and an adviser perspective, there is much we can do now and going forward. Part of that initial challenge is around communication and providing landlord clients with the information they need to be able to make an informed cost-benefit decision on what might need doing.
Advisers are in a strong position to provide this to landlord clients, not only to deliver that information but to potentially act as a catalyst to reconnect with them and to outline what may also be available in terms of specific mortgage products that might support this work, and to also highlight changing lender criteria in this space.
And that’s of course where lenders like Foundation can come in. Our focus on the provision of ‘Green mortgages’ to both residential and landlord borrowers is growing, and we are looking to widen the product proposition in this area, supporting those landlords who want to own and offer energy-efficient properties to their tenants, and also allowing them to access the equity within their existing properties in order to carry out the work required.
There’s no doubting that energy efficiency, when combined with what we’re seeing in terms of utility bills rising steeply, is going to play an important role in the UK housing market for many years to come. By getting on board now, and focusing clearly on this area, we have a better opportunity to get ourselves and our clients ahead of the curve.
George Gee is managing director – commercial at Foundation Home Loans