Will new energy rules hinder buy-to-let supply?

April 6, 2018

 

 

Landlords across the UK are dealing with change once again. From April 1st landlords are not permitted to let properties with an Energy Performance Certificate rating less than E.

 

The rules will apply to all new tenancies or renewals of existing tenancies from 1st April. The regulations will be extended to cover existing tenancies from 1st April 2020.

 

If properties don’t meet the requirements then they must remain empty until they do. If landlords let out a property or renew a tenancy on a home with a rating of G or F, they face fines of up to £4,000.

While few would argue against the importance of ensuring all rental properties are as energy efficient as possible, it seems these new requirements could be harming the buy-to- let market, particularly when it comes to supply.

 

According to new figures from professional body ARLA Propertymark, the number of homes available to rent has fallen to its lowest level since May 2016 and ARLA’s chief executive David Cox believes one of the reasons for this is the new energy efficiency requirements.

 

Commenting on the findings before April 1st, Cox claimed the results were ‘no surprise’ adding "The dip in supply indicates that landlords are cutting it fine and taking their properties off the market to make the necessary changes before the deadline – but we could also see up to 300,000 properties taken off after the deadline passes because they don’t reach the minimum requirements. This is also likely to push rent costs up as competition heats up among prospective tenants. We could have a supply crisis on our hands and for landlords who haven’t yet started to upgrade their properties, now is the time to act and fast.”

 

It’s a difficult situation. Yes, it’s absolutely imperative that landlords are making sure the homes they let are safe and fit for purpose. However, it is worrying if this strict deadline and the risk of fines will have an adverse impact on supply, especially as the government is currently consulting on plans to make it more difficult for landlords to make their properties meet requirements.

 

At present landlords can access loans via the Green Deal to improve their homes so there is no upfront cost to them. However it seems the government is now consulting on proposals to remove this option and introduce a “landlord funding contribution” component, capped at £2,500.

 

Is this another example of a good idea in principle that doesn’t quite work in practice?

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