As inflation continues, the rising costs of energy efficiency upgrades are putting pressure on private landlords and investors
The rising cost of energy efficiency upgrades in order to reach government targets has hit the residential property sector hard- and official statistics suggest that over half of the homes in England are still rated D or below for energy efficiency.
Regulatory standards are expected to tighten when the Future Homes and Buildings Standard comes into effect in 2025.
Some landlords may find the rising cost of energy efficiency upgrades prohibitive
Mike Feasey, relationship director at Secure Trust Bank says landlords and investors are in an increasingly difficult position. “We’re getting a lot of feedback from private landlords that high costs are proving a barrier when considering the benefits of upgrading their property’s energy efficiency credentials.
“The government is piling on the pressure by proposing that all rented homes should fall into the A-C bracket for new tenancies by 2025 and for all tenancies by 2028, but the cost of upgrading is becoming more expensive by the day.”
The BCIS Material Cost Index is forecasted to reach 17.5% by the end of 2022 with a high degree of volatility across all material categories. Private landlords also need to factor in the increase in labour costs for tradesmen to complete any upgrades to their properties.
However, Mike says doing nothing is not an option. “The clock is ticking, and costs can quickly rise through inaction. The cost of retrofitting existing buildings with green and sustainable measures will, in all likelihood, continue to rise and make it more difficult to recoup the cost of that investment throughout the remaining life of a property.”
Alternative sources of funding should be explored
With currently over half of the homes in England rated D or below for energy efficiency, Mr. Feasey believes private landlords and investors do have options. “Residential investment loans for investors to acquire or maintain an existing stock or release equity to fund further energy efficient residential projects are an option worth considering.”
“Doing nothing is not an option because the danger is that landlords and investors will be left with properties that cannot be let and may prove difficult to sell.”
