"For landlords, the cost of upgrading older properties is substantial, and without government-backed incentives, we're likely to see limited progress toward the proposed EPC targets"
- Allison Thompson - LRG
New data from a recent survey conducted by Leaders Romans Group reveals a significant gap between tenant demand for energy-efficient rental properties and their willingness to pay for them. As the government considers new regulations requiring rental properties to meet an Energy Performance Certificate rating of C or higher, tenants overwhelmingly support these changes. However, most are reluctant to pay higher rent for these improvements.
The survey reveals that 80% of tenants are in favour of their properties being upgraded to an EPC rating of C or above, reflecting a clear desire for more sustainable homes. However, only 6% of tenants are willing to pay more rent to achieve these upgrades. This presents a significant challenge for landlords, especially in light of rising retrofitting costs and reduced government support for energy efficiency improvements.
One landlord said, “I own an older property that will cost tens of thousands of pounds to improve from an EPC 'D' to an EPC rating of 'C'. It will take too many years to recover the investment made.”
Another said: “Someone needs to point out to the government that if the minimum EPC is raised to 'C', landlords like me will sell up rather than spend £50,000 upgrading the property to meet this threshold. I simply can't face the cost, so to be compliant with the law I will have to evict my tenants when that time comes.
"Not a good outcome for the tenants or me, and will certainly put increased pressure on the rental sector. There are likely to be hundreds or thousands of landlords thinking the same thing.”
A government initiative, the Green Homes Grant, which aimed to retrofit 600,000 homes, was closed prematurely after reaching fewer than 10% of that target. The majority of remaining support, such as grants available under the Energy Company Obligation (ECO), now focuses on low-income households.
This shift leaves many landlords, particularly those with older properties that do not qualify, struggling to finance the retrofits necessary to meet EPC regulations. According to RICS, the UK will need an investment of £250 billion to upgrade its 29 million homes by 2050 to meet decarbonisation targets.
One tenant said: “I think they are really just causing more problems to landlords, and I disapprove of the government's stance on this” Another, “if introduced, they should be funded by the government since they keep changing the goalposts.”
And another: “If it's not broken, then don't fix it works for me in this situation; only change things when needed to save on costs for both tenant and landlord”.
Adding to these challenges, the Rightmove Greener Homes Report 2024 revealed that 50% of landlords are concerned about the high costs of meeting EPC requirements. Retrofitting properties to meet EPC C standards is estimated to cost landlords an average of £8,074 per property. With rising material costs and limited access to government grants, landlords face increasing financial pressure to implement these upgrades.
This combination of limited funding and escalating costs highlights the critical role that government incentives will need to play in driving energy efficiency improvements across the rental sector. Without additional support, many landlords will be unable to afford the necessary upgrades, hindering the UK’s progress toward its 2030 EPC targets.
The LRG report also reveals tenants’ strong preference for specific energy-efficient features. 70% of tenants want energy-efficient appliances in their homes, making this the most in-demand feature. However, only 11% of tenants are willing to pay extra for such appliances, underlining the affordability gap.
Tenants also expressed interest in solar panels (8%) and low-flow fixtures (11%), though only 6% are willing to pay extra for these additional upgrades, underscoring the challenge of balancing demand with affordability.
Allison Thompson, National Lettings Managing Director at Leaders Romans Group, commented: "The desire for greener homes is clear, but tenants are not prepared to bear the financial burden. While tenants are eager to see energy efficiency improvements, particularly those that lower utility bills, there is little appetite to pay higher rent for these upgrades.
"For landlords, the cost of upgrading older properties is substantial, and without government-backed incentives, we're likely to see limited progress toward the proposed EPC targets.
"Balancing tenant demand for sustainable homes with the financial realities faced by both tenants and landlords remains a significant challenge. Without government intervention or financial incentives, the adoption of these features will likely remain slow, despite growing interest.
"Collaboration between the government, landlords, and tenants is essential to meet the UK's energy efficiency goals. Incentives are crucial to ensuring sustainability without increasing financial strain on either party."
