The Daily Telegraph - Saturday - Money
Energy bills start to dent landlords’ profits
Landlords who do not make energy efficiency upgrades face void periods and possible rent discounts, experts have warned.
Soaring energy bills are pushing tenants to ditch rental homes that are expensive to run as forecasts for the energy price cap continue to climb.
Jamie Lafferty, 39, is about to terminate his rental contract on his one- bedroom apartment in Glasgow because his monthly energy bill doubled from £110 to £230 when the energy crisis began. “It has gone from being inconvenient to uninhabitable,” he said. Mr Lafferty’s costs are so high because the property has an Energy Performance Certificate rating of G – the lowest possible rating.
“Every element of this flat is conspiring to be cold. It’s a protected building, so it is not possible to put in double glazing. It has high ceilings and there is no central heating,” said Mr Lafferty.
He has managed to get his monthly bill down to £ 185 by making major cutbacks. “My work has taken me to Antarctica six times, so I have a lot of thermal gear, which I wear during the winter months. I told myself that I wouldn’t turn the heating on between April and October,” said Mr Lafferty, who works as a travel writer.
He has found a flat that he is hoping to buy, but if the sale falls through Mr Lafferty said he would still move out. “There is no way that I will spend another winter here.”
For Mr Lafferty, and many other home buyers, the energy efficiency of a property has become very important. “The EPC became the first thing I was looking for in my house hunt. This flat is the opposite of the one I’m living in, it has a C rating and double glazing.”
In England there is a minimum requirement for all rental properties to have an EPC rating of E. In Scotland, however, although legislation for a minimum E requirement was planned, it never passed through Parliament.
Both Governments now have proposals to introduce a minimum target of band C – a benchmark four levels higher than Mr Lafferty’s current flat.
Even without incoming legislation, landlords need to make energy upgrades to continue appealing to tenants, experts said. Rob Jones of Property Investments UK, a buy- to- let consultancy, said energy efficiency ratings would filter into rent levels over the next six months.
“Properties with low ratings might rent for 5pc or 10pc less,” he added.
Properties with lower EPC ratings will also take longer to let out, particularly during the winter, Mr Jones warned. “Landlords could have another month or two of voids before they can let out their properties.”
Katinka Hill of Chestertons estate agents in central London said: “We are definitely seeing more stock come to the market and by the end of the year when tenants have more choice, they will be making decisions to offer less on properties with low EPC ratings.”
Lettings agents are likely to start factoring EPC ratings into rental valuations soon, Ms Hill added. “The imbalance between supply and demand will definitely correct itself, and then when tenants have more choice, the EPC rating will play into rental valuations,” she said.
‘When tenants have more choice they will offer less on properties with a low rating’
Mr Jones said tenants were already refusing to view properties that had a low EPC rating. “They are calling us up to check the rating before they come to viewings.
“Landlords can’t get away with a property that is inefficient now, even in a busy market with very little housing supply.”
Adam Kingswood of Kingswood Residential Investment Management, a buy-to-let specialist in Nottingham, said: “Three years ago I could have counted the number of tenants’ requests to see EPCs over the past 10 years on two hands. Now all eyes are on EPCs. We put it in the opening line of an advert if a property has a B rating.”
Mr Lafferty added: “I am tempted to spray a message on the wall telling the next tenant to ask to see the EPC.”