Private landlords face a combined bill of £17.9 billion to upgrade their properties to a minimum EPC band C by 2025, with landlords in the capital facing the largest bill at £3.2 billion.
Knight Frank’s figures highlight the looming crunch within the private rented sector presented by the EPC upgrade requirements, funding details of which the Government in England and Wales has yet to publish following its recent consultation.
Flora Harley (pictured), Head of ESG Research at Knight Frank, points out that while 13% of renters are willing to pay a premium for a low carbon property, the average annual rent in 40% of local authorities wouldn’t cover the £9,260 required spend to bring a property up to EPC band C.
She says her new EPC upgrade cost data is based on the expenditure cap of £10,000 per property.
This is the figure over which Ministers have decided landlords can apply for an exemption because the expense would make rental properties uneconomic to upgrade.
Despite sounding high, previous research has highlighted that the average cost of upgrading a dwelling previously rated EPC band D or below to a band C is £9,260.
Although this varies, landlords with a property in EPC rating band D, for example, typically spent £5,500 on the necessary improvements to move to band C, with this figure doubling to over £10,000 on average for properties in bands F and G.
“If legislation is passed, the additional cost pressures placed on landlords – which come on top of rising mortgage costs, changes to mortgage interest relief and the erosion of capital gains tax allowances – may lead some landlords to look to rationalise portfolios or leave the sector entirely,” says Harley.
This map shows the local authorities with a high proportion of PRS propeties that would need upgrading to reach an EPC band C certificate.