With the recent announcements made in the King’s Speech regarding renter protections and upcoming changes in the next parliament, landlords should brace themselves for new regulations. The Labour party has vowed to put an end to Section 21 ‘no fault’ evictions, which could have a significant impact on the rental market. Additionally, there are indications that measures to improve the energy efficiency of rental properties will be introduced alongside these changes.
Under the previous government, proposals to mandate landlords to ensure their properties have an Energy Performance Certificate (EPC) rating of C or above by 2025 for newly rented properties were postponed. However, Labour is likely to revive this initiative. Angela Rayner, the Labour deputy leader and now secretary of state for housing, has expressed support for stricter regulations on rental properties. The Labour manifesto also includes a commitment to ensuring that homes in the private rented sector meet minimum energy efficiency standards by 2030, although the exact standards are yet to be defined.
For landlords looking to upgrade their properties to be more energy-efficient or capitalize on properties with good green credentials, green mortgages could be a viable option. These mortgages typically come in two forms – one offering preferential interest rates for properties with an EPC rating of A or B, and the other providing cash back for retrofitting properties to improve their energy efficiency. However, the current market offerings for green mortgages do not always provide significant benefits for landlords seeking to make their properties more eco-friendly.
Data from Moneyfacts reveals that the average rates for green buy-to-let mortgages have seen a significant increase in recent years, making them less attractive compared to conventional buy-to-let mortgages. The disparity in rates raises concerns about the cost-effectiveness of using green mortgages for retrofitting properties, especially for older housing stock such as Victorian homes.
The decision to opt for a green mortgage should also take into account the location of the property and the associated retrofitting costs. In areas where property prices are high, such as London and the South East, investing in green upgrades may be worthwhile. However, in regions where property prices are lower, the cost of retrofitting may outweigh the potential benefits offered by green mortgages.
Meera Chindooroy from the NRLA acknowledges the potential of green mortgages in incentivizing energy-efficient investments for landlords, especially given the current high-interest rates. However, the lack of clarity on the specific green standards that landlords will need to meet by 2030 poses a challenge for landlords planning to make their properties more environmentally friendly.
In conclusion, while the prospect of green mortgages presents an opportunity for landlords to improve the energy efficiency of their properties, careful consideration of the costs and benefits is essential. With impending changes in regulations and a focus on energy efficiency standards, landlords must stay informed and make informed decisions to meet the evolving requirements of the rental market.