A D-rated opportunity?

The allure of incentivised lending for properties with higher Energy Performance Certificate (EPC) ratings is certainly escalating. Alongside growing residential awareness, interest and action is also increasing within the landlord community, especially on the back of upcoming legislative changes. This has been said many times but – in light of some upcoming findings – it certainly does no harm to reiterate that, from 2025, all newly rented properties will be required to have an EPC rating of C or above. Currently, properties only require an EPC rating of E or above. Existing tenancies will have until 2028 to comply with the new rule changes.

So what about those BTL properties with a rating of D and below?

Research undertaken by Landbay revealed that 68% of the landlords surveyed had properties with an EPC rating of D or lower. However, the majority of those (80%) intend to make changes to bring their properties up to at least a C rating.

Many landlords are viewing these changes as an opportunity, especially those with larger portfolios of 10 properties or more. In the survey, 53% of these landlords said they would consider adding to their portfolios and buying homes that were D rated or lower and bring them up to at least a C rating. This compares to 32% of portfolio landlords with four to 10 properties who would do the same but only 20% of non-portfolio landlords would choose to buy and upgrade. For those landlords who know about the proposed EPC changes and are also aware of green mortgages, 84% of them like the incentive of a discounted interest rate.

As always, individual approaches to portfolios will differ but it’s clear from this data that portfolio landlords who maintain a long-term commitment to the BTL market are still on the lookout for opportunities to add to their portfolios, even those which just sit beyond the C rating.

Improving the energy efficiency of such properties is likely to increase their value, rental potential and yield, as well as reducing tenant’s energy bills. And such opportunities will continue to emerge over the course of 2022.

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