Climate change is impacting every industry, with the property market no exception. Landlords will need to respond in turn, which means demand for refurbishment loans and home improvement loans is likely to increase.
In this blog, we explore the key factors influencing landlords’ decision to make their properties more energy efficient. We also explain what ‘eco privilege’ is and how bridging buy-to-let lenders can help tackle it.
New EPC regulation
Every residential property in the UK has an Energy Performance Certificate (EPC). This certificate will include a score denoting the energy efficiency of the building. These go from A, the best, down to G, the worst.
In April 2025, the Government will be introducing a new regulation, requiring any property being let to new tenants to have an EPC rating of C or higher. There will be fines of up to £30,000 if a property does not comply. Currently the minimum property rating for buy-to-let assets is E. That’s a rating increase of two!
Landlords will need to act. It is estimated that three in five homes across the UK have an EPC rating of D or lower. That is 12.6 million properties.
Source: National World
Property refurbishments are therefore likely to become more commonplace among landlords in the years to come. There are now just three years to get rental properties up to standard. But aside from the new regulations, there are other reasons landlords ought to consider the energy efficiency of their properties.
Don’t know where to start? Read our Top 5 energy efficiency hacks for some energy-saving inspiration.
Demand for energy efficient homes
Environmental issues are influencing people’s decisions to a greater extent than ever before. This is particularly true when it comes to their home. After all, the energy efficiency of a property is directly linked to its running costs, meaning ethical concerns are compounded by financial ones.
One study has found that 42% of tenants in the UK consider the environmental impact of the property before deciding whether to rent. Further, 15% say they would pay more rent for a new boiler and heating system, while 18% would pay more if their windows were more efficient.
This trend is only going to become more prevalent. As energy costs spiral, renters are likely to prioritise properties that are energy efficient, given this will lower their bills. Landlords will need to ensure they can appeal to tenants by ticking this box.
The demand for energy efficient homes extends beyond renters. Buyers will also be considering this factor. So, landlords could benefit in terms of the capital growth of their property if it is greener – estimates suggest energy efficient homes attract a £40,000 premium.
Preventing eco privilege
The question for many landlords will be: how do I finance the refurbishments?
It is an important point. In fact, it has been suggested that the drive to make properties more energy efficient could result in a schism within the property market.
From insulating roofs or upgrading boilers to installing double glazing or investing in solar panels, these refurbishment projects can prove expensive. Landlords who cannot afford to undertake such work could be cut adrift, either prevented from renting out their properties or fined for doing so.
Therefore, it is vital that lenders are ready to support landlords, in order for them to meet their deadline. Namely, they need access to the right financial products.
Bridging loans for home improvements
A flexible approach is crucial. Not all landlords will want to take on more long-term debt to finance the refurbishments. Others will want to rebalance their existing financial commitments, while some will need fast loans to get work completed without delay.
Specialist lenders like MFS are ideally positioned to help. For one, we regularly provide refurbishment loans and home improvement loans. We can also provide second charge bridging loans for those with an existing facility on the property.
Alternatively, a landlord could consider a refinancing loan. This can help landlords bridge the gap between the start of a renovation project and the sourcing of a longer-term financial solution.
Ultimately, we understand that every client is different. We will assess a borrower’s needs and financial circumstances to deliver the right solution.
For any landlord preparing to ‘go green’, speak to MFS to find out how our fast, flexible specialist finance products could help.