£38 billion to retrofit rental properties

Recent research from Jones Lang LaSalle (JLL) reveals the potential total cost of bringing properties owned by UK landlords up to the target EPC rating.

Only 15% of rental properties currently meet the proposed target, which leaves approximately 2 million homes at band D and a further 1.9 million at E or below. JLL estimate upgrade costs of £6,000 for a property currently at D and a whopping £13,285 for E.

This is how they calculate the total bill at a hefty £38 billion and highlight the potential impact on landlords.

What about the cost cap?

Fortunately there is current a cost cap on the improvements you are expected to make as a landlord, which stands at £3,500. However, this is under review and early government suggestions were that it should rise to the £10,000 mark.

While this is not confirmed, should it come to pass, it would make the figures proposed in the JLL research more immediately realistic.

The implications

Currently it seems that there are relatively few landlords concerned about this upcoming requirement, possibly due to a lack of awareness. It is interesting that JLL focus on the potential implications.

They pick up on the established theme that being a landlords is a bit less attractive than it used to be already (e.g. due to the removal of mortgage tax relief) and suggest that there is a pool of landlords already disinclined to further invest in their properties. Added to this is the fact that 1/3rd of privately rented properties are owned by landlords over the age of retirement (a figure which will double in the next ten years!)

Time for an exodus?

The implication in the report is that this will lead to an exodus of landlords (some 22% leaving the market or reducing their portfolios according to government research). JLL present this an opportunity, given that these homes would need to be brought up to standard or lost to the market, suggesting a role for institutional investors with the appropriate environmental credentials.

It is an interesting angle and shows the value of the average landlord’s portfolio as well as the positive implications of improving the EPC performance of the sector – it would save 12million tonnes of Co2 each year and reduce household bills by 2.6 billion as well.

Stay on course

While the cost implication for private landlords are significant, there may be many that stay the course. Given that the average house price has increased by 9.4% over the last 12 months the average gain on a property in the UK would be around £28,000, significantly more than the cost of improvements highlighted.  

You can access the full report at https://www.jll.co.uk/en/trends-and-insights/research

Jane Roberts

Jane writes about sustainability issues for a wide range of national publications and is a regular contributor to the property press.

Previous
Previous

Is hydrogen the solution?

Next
Next

When am I exempt from the minimum EPC requirements?