Green Scheme Delayed by EPC Spending Cap Dispute

Green energy efficiency plans for buy-to-let rentals seem in disarray as Labour plays down a row between the Treasury and ministers.

Westminster leaks claim the Treasury and Department for Energy Security and Net Zero (DESNZ) cannot agree on policy, including setting a cap for landlord spending on upgrading rented homes to an Energy Performance Certificate (EPC) C banding.

Energy Secretary Ed Miliband had slated a warmer homes scheme this month after securing £13 billion of funding, but the launch date has been pushed back.

Energy Consumers Minister Martin McCluskey denied the rift and told MPs he hoped to roll out the scheme before Christmas.

The sticking point seems to be setting a cap on how much landlords should contribute to upgrade buy-to-let homes to a C EPC grade by 2028 for new tenancies and 2030 for all private rented homes.

Millions of homes fail new standard

Around 55 per cent of private rented homes are rated EPC D or less, according to government data. This equates to around 2.6 million homes.

The EPC spending cap is the maximum landlords should spend on energy efficiency improvements before they can apply for an exemption if the property still fails to meet the EPC C.

The current cap is £3,500, which will soon increase to £10,000.

Government estimates suggest the average cost of upgrading properties to EPC C is around £7,700, but around 10 per cent of properties cost more than £15,000 to upgrade. A recent consultation asked if raising the cap to £15,000 would be appropriate.

Meanwhile, a study by mortgage consultancy Pegasus Insight reveals that plans for upgrading homes to an EPC C grade is the main reason for landlords to sell buy-to-let properties.

A landlord trends report for the second quarter of this year found 38 per cent of landlords planning to sell a buy-to-let home in the next 12 months say energy efficiency requirements have influenced their decision more than any other factor.

EPC stress triggers landlord exodus

The report echoes government data, showing 56 per cent of buy-to-let homes are rated EPC D, with another 20 per cent rated lower.

Mark Long, founder and director at Pegasus Insight, says: "Energy efficiency rules are now a decisive factor in landlords' business decisions. With around half of rental stock still below the target EPC threshold, the cost and complexity of upgrades are prompting many to rethink their portfolios.

"This is a pivotal moment for the sector: the ambition to improve energy standards is welcome, but without clearer guidance and practical support, there's a real risk that good landlords will simply choose to exit the market rather than invest.

Upgrading a rental home's energy efficiency aims to save tenants £240 a year on energy bills - which means the average £7,700 on draughts, boilers and insulation will take around 30 years to repay the investment.

Landlord guidance published by the government includes advice about how to fund EPC improvements.