Some 71% of landlords say they are unlikely to buy a property with an EPC rating of less than C, according to the latest Foundation Home Loans research for Q2 2023.
This was particularly prevalent among portfolio landlords, with 74% of those with 6-10 and 11-19 properties, and 78% of those with over 20 properties stating they were less inclined to buy properties rated D or below.
Only 18% of landlords said the EPC level is irrelevant.
The report also highlighted landlords’ awareness of the future legislation around a minimum EPC level of C being introduced for all PRS properties — 71% said they fully understood the details, while 24% were aware, but did not understand the details, and just 4% were completely unaware.
In terms of the work landlords intended to do to upgrade properties’ EPC ratings, 37% said they would carry out the works at the minimum cost required, while 20% said they would carry out works to maximise the long-term value of their property.
However, a quarter said they would not do any works and would either sell the property or not re-let it.
The most popular way of funding renovation works for EPC improvements was via savings, quoted by 57% of landlords.
Meanwhile, 33% said they would increase rent to cover the costs, 18% were looking to access government grants or funding, and 19% confirmed their intentions to either take a further advance from their lender or take out a loan.
Grant Hendry, director of sales at Foundation Home Loans (pictured above), said: “It’s clear from this research that landlords are aware of what is likely to be coming, and are thinking seriously about their existing portfolios, how they might fund improvements, and what their plans might be when this is introduced.
“With landlords anticipating a cost of over £10,000 per property to improve its EPC level to C, it is perhaps not surprising they are disinclined to buy properties already below this.
“In effect, they are future-proofing their portfolios by opting only to buy C and above properties now, while they will presumably focus on those properties within their portfolio which are not currently at this level.
“Clearly, this presents a significant opportunity for advisers to not only discuss this with their landlord clients, but to also provide solutions about the funding of these improvement works.
“What we do know is there are clearly mortgage pricing incentives to be accessed for properties which are already at EPC C.
“It seems clear this will remain a major focus within the PRS for years to come, and from an advisory point of view, it is worthwhile having these conversations with landlords immediately.”
