New EPC Regulations Putting Pressure on Landlords

Did you know that 59% of tenants live in rented homes that aren’t energy efficient?

Millions of homes in the UK Private Rental Sector (PRS) don’t even meet basic standards of decency. In fact, 2 million homes (1 out of 10 in England) contain a Category 1 Hazard, meaning they are in such poor condition that they put tenants’ health or safety at risk. 

To help restore the imbalance in the UK PRS, the Government is rolling out the new Minimum Energy Performance of Buildings (No. 2) Bill to increase the minimum energy efficiency levels for all rental properties.

What do the new EPC regulations mean for landlords and tenants? 

What is the Current State of EPC Ratings for Rental Properties?

At Outra, we combine data and innovation to get an unparalleled, unified perspective on the UK’s EPC situation. We compiled the publicly available EPC data and matched it at the individual property level. Where property data is missing, we used data science to model what the EPC of that property will be. 

According to our recent analysis, there are 5.6 million rental properties in the UK (excluding Scotland), and 59% of those homes have an EPC rating of D or below. ​​More specifically, 49% are D rated, 9% are E rated, and 1% are F or G rated.

That’s 3 million homes that cost more to run than they need to!

Our research also shows that London and West Midlands are the worst-performing locations, with 62% and 60% of homes rated D or lower in each area, respectively. 

Breaking it down even further, the worst-performing local authorities are:

  • Maldon (75%)
  • Harrow, Craven (74%)
  • Southend of Sea, Waltham Forest (73%)

The best performing local authorities are:

  • Tower Hamlets (31%)
  • Basingstoke and Deane (36%)
  • Welwyn Hatfield (38%)

It’s clear that the UK lacks symmetry in terms of living standards, but the government is trying to improve the situation.

What Do the New EPC Regulations Mean for Landlords and Tenants?

The new bill mandates changes to the EPC regulations, requiring new tenancies to have an EPC rating of at least Band C from 31 December 2025. For existing tenancies, the same rules will apply from 31 December 2028.

This means the average tenant will eventually pay lower energy bills than the average homeowner. With the dramatic increase in UK energy costs this year, this new bill could be a game-changer for low-income households.

Although, it’s not all sunshine and rainbows. The new EPC regulations also risk removing some rental homes from the market and putting additional pressure on the UK’s Private Rental Sector.

The estimated cost of upgrading a privately rented property to a C rating is £7,646, meaning it could cost up to £25.7 billion to upgrade the 3 million rental properties rated D or less. That’s a lot of money that some landlords either can’t or don’t want to pay. 

According to a recent survey, more than half of landlords with properties rated D or lower were considering offloading their properties to avoid paying for upgrading them. When landlords choose not to extend or renew rental agreements, tenants will be forced to find new places to live.

How can the UK embrace this change?

The new EPC regulations will benefit the UK’s PRS on every level. Landlords will have more sustainable properties that are easier to sell or rent out, and tenants will get a decent standard of living through better housing quality and lower energy costs. 

But, the only way to prepare for the changes the new EPC regulations bring is to understand where potential issues might be and mitigate any risks. With the housing market already in crisis, we need reliable data and insights to properly plan for and manage changes without causing further detrimental effects.