The UK government has been proposing aggressive property regulations to meet the ambitious target of going completely Net Zero by 2050.
A property’s energy efficiency is assessed, and a letter is assigned using an EPC rating (Energy Performance Certificate). As it stands, rental properties must achieve an E grade or above before tenants can legally reside there. If upgrades are necessary, the property owner must spend up to £3500 to improve the rating.
But this looks set to change. Under new proposals that the government has put forward, the minimum requirement could change to EPC band C, and the spending cap could rise to an eye-watering £10,000.
Some in the property sector have felt unfairly targeted, calling these proposals a ‘war on landlords.’ But could making these eco-friendly changes benefit buy-to-let investors in the long run?
Why Should Property Investors Go For Energy Efficient Properties?
1. Increase Value
Research suggests a strong correlation between higher EPC ratings and higher property prices. According to Knight Frank’s 2022 analysis, upgrading a home from an F or G rating to a C can add as much as 19.6% in value to the property. There are useful guides, such as the RWinvest guide on how to make money with property in 2024 and overseas property guides provided by UK estate agents.
2. Prevent Future Expenses
A more energy-efficient building will have lower maintenance costs than a less energy-efficient one. It can also be considered a way of future-proofing a property so that further modifications won’t be necessary in the future.
3. Attract More Rental Demand
Due to the energy crisis, renters are more aware than ever of energy efficiency and are eager to find ways to keep utility bills down.
According to Rightmove and RCCIL, one in five tenants consider energy efficiency a major factor when choosing a home.
4. Collect More Rental Income
Properties with a grade A EPC rating usually have higher rents than those in the lower bands. Tenants are willing to shell out more in rent to save on energy bills and alleviate their conscience regarding environmental impact.
5. Reduce Emissions
Speaking of environmental impact, energy efficiency in buy-to-let properties will result in an overall greener property industry, something we can all benefit from in the long run.
How to Start Seeing the Benefits of an Energy-Efficient Buy-to-let
Apart from avoiding legal issues, the advantages to going green are myriad for buy-to-letters, giving plenty of incentive to stay ahead of the curve.
It can be expensive for current landlords to upgrade, but some help is available through financial help and government grants.
New build properties are the best option for investment as they usually already include cutting-edge technology to improve the energy efficiency of the building, which is often expensive and difficult to retrofit into existing properties.
