As part of its net-zero target, the government wants to reduce energy consumption from domestic properties. Landlords, including HMO landlords, are one of the many targeted by this new legislation that may come into force on 1st January 2028.
By that date, all rented properties may be required to have an EPC rating of C or higher. Failure to comply with the new regulations would result in financial penalties. There would be a cap of £10,000 as the maximum spend on each property but how this will work is unclear at the time of writing.
The Minimum Energy Performance of Buildings (No. 2) Bill, at the time of writing, is not actually law – yet. However, given the government’s well-publicised commitment to net zero which they share will all of the opposition parties, we think the chances are that it will become law.
Landlords’ reaction to the proposed new EPC regulations
It’s been mixed. If this does become law, many landlords will be affected. Two-thirds of rental properties don’t reach EPC level C, according to property lending experts Octane Capital
Which’s Stephen Maunder reported that many landlords believed that they’d have to spend up to £10,000 on each of their rented properties to bring them up to the proposed standards. Some were considering selling up as a result of that, steeper taxes and unfavourable changes in rental laws.
This is Money reported a Mortgage Works survey that one-third of landlords were not confident that they could get their private rental properties up to a minimum EPC rating of C by the proposed date.
We receive mixed feelings about the energy efficiency requirements. Some of our clients are really into the “Green Mission”. They want their property portfolio to reflect that and they are happy to show their tenants that they care about energy saving and sustainability.
Of course, other HMO investors are concerned and often they are let down by these new requirements as they see only the costs and not the benefits of it.
Other landlords don’t even see this coming and we feel they will take a big hit.
Why it might be worth getting an EPC assessor out now
Although not much has probably changed since you last got your property’s energy efficiency rated under the EPC system, there may be a case for getting one now, even if you’re not due just yet.
If you do get a new valid EPC, you’ll have a better understanding of your property’s energy performance as it is today. This should give you an idea of what work needs carrying out and what sort of budget you’ll have to set aside.
And, if one property, in particular, keeps requiring maintenance and is the subject of many complaints from tenants, doing the work now might save you more over doing it later in case it deteriorates further.
Making energy efficiency improvements to your HMOs
An HMO rental property is expensive to maintain let alone improve. However, various suggested improvement you could make to your HMO include:
Insulation minimises heat loss and can significantly improve energy efficiency. There are five types of insulation:
- Wall Insulation: A professional can tell you whether cavity wall insulation (filling the gap between the two layers of a wall with insulating material) or solid wall insulation (applied externally or internally to the walls) is better for your HMO.
- Loft insulation: Installing 270mm of insulation in your loft significantly reduces heat loss. Prices vary for standard insulation materials like mineral wool, sheep’s wool, and rigid insulation boards. This is probably the cheapest and fastest way to improve an EPC rating as it is often easy to install.
- Room-in-room insulation: If you’ve converted the attic for use as a room, you can insulate it by fitting insulation boarding under existing plasterboard walls between the rafters.
- Floor insulation: A less well-known approach, this involves installing insulating materials beneath the floorboards. Floors may be responsible for up to 10% of heat loss.
- Hot water cylinder insulation: offers only marginal savings and is only suitable if your HMO has a conventional boiler.
Window and door upgrades
Most HMOs now have double glazing and uPVC doors. There is still scope to improve energy efficiency though with these three approaches:
- Triple glazing: double-glazed window U-value is 1.6 whereas triple-glazing window value is 0.8, a significant difference.
- External doors: compared with other types of doors, including uPVC, fibreglass doors offer greater energy efficiency because fibreglass is a particularly poor conductor of heat. External doors should be draught-proofed and have airtight seals too.
- Internal doors: you can source internal fibreglass doors too. But more important for internal doors are draught excluders. Remember that internal doors were affected by the latest HMO fire regulations.
Improving heating systems
Modern heating systems are more energy efficient by law although replacing them in larger, older properties can be expensive. Three heating-system-based options for improving energy efficiency are:
- A new boiler: Combi boilers are not suitable for HMOs unfortunately despite their better energy efficiency. However, “A”-rated conventional boilers are now available from manufacturers like Worcester Bosch and Viessmann.
- Smart thermostats: Inspire Home Automation has launched smart thermostats specifically designed for landlords. There’s one here specifically for HMOs.
- Radiator Upgrades: Modern radiators with thermostatic radiator valves (TRVs) distribute heat better and offer much more precise temperature control.
Switching to energy-efficient lighting reduces energy consumption and that’s reflected in your EPC. Two options are:
- LED lighting: LED bulbs consume up to 90% less energy than traditional incandescent bulbs.
- Smart lighting controls: smart lighting controls like motion sensor lights are only a factor when judging a commercial property’ EPC band however they will save you money on electricity bills.
Renewable energy source options
EPC assessors consider how the primary source of an HMO’s heating and electricity when assigning a rating. Four ways to improve your EPC ratings are:
- Solar panels: This offers you the opportunity to save on energy bills. Installing them will boost your EPC rating.
- Solar thermal systems: solar thermal systems provide hot water, not electricity. They score well on EPC assessments because they can generate 50-60% of the warmth needed for hot water per annum.
- Biomass boilers: landlords will be rewarded for using biomass boilers for their lower energy consumption.
- Heat pumps: the debate is out on heat pumps at the moment on their effectiveness. The worry is that Britain’s climate is not right to get the maximum benefit from them. It may be worth sitting on the fence with this for now and trusting more proven technology, especially solar panels.
Are there any exemptions?
Although not directly related to the proposed Minimum Energy Performance of Buildings (No. 2) Bill, the Domestic Minimum Energy Efficiency Standard (MEES) Regulations apply to all privately rented properties in England and Wales that need an EPC and are covered by a tenancy agreement.
These exemptions only cover you if you have an HMO with an EPC band rating of F or G where you can’t simply improve the property to achieve an E rating.
The specific exemptions are:
- High cost/affordability exemption: If buying and installing the cheapest recommended series of improvements for a property is more than £3,500 (inc. VAT), you can get an exemption. You need to provide 3 quotations from different installers to support your claim. Your exemption is valid for 5 years. When it runs out, you can apply for another 5-year extension if you still can’t make the improvements for £3,500 or less.
- All improvements made: This exemption applies where you have made all possible improvements to achieve an EPC E rating and the property still didn’t get an E rating. The exemption lasts 5 years which you can again extend by another five years if the situation does not change. If the information you’re relying on to apply for an exemption is not in the EPC, you must submit that document together with your application.
- Wall insulation: Regulation 24(2) acknowledges that certain wall insulation systems may not be suitable in certain situations. If that’s the case with an HMO you own, you must present written expert advice stating that insulation is not appropriate for your property due to its potential negative impact on the fabric or structure of the property. This often occurs if a building is listed by the Heritage Department.
- Consent: When you need legal third-party consent for energy efficiency improvements and consent was either refused or subject to a condition you believe to be unreasonable, you can apply for an exemption. As with other exemptions, this last for five years and is subject to renewal.
- Devaluation: If you have a report from an independent RICS surveyor advising that installing specific energy efficiency measures would reduce the market value of the property by more than five per cent, you can apply for an exemption. You need to include this report with your application. As with other exemptions, this last for five years and is subject to renewal.
- New Landlord: If you become a landlord and you’re subject to one of six circumstances set out by the regulations, you can get a temporary exemption from compliance for 6 months after you become the landlord.
Is this all HMO landlords need to worry about?
You might be thinking that, if you do all the work required under the proposed changes, you’ll be OK. We’d love to be able to offer you that comfort. However, the 2028 requirement we’ve discussed in this article was originally 2030. It wouldn’t surprise us if the rules changed again and rental properties including HMOs require a minimum B rating in ten years.
We are hopeful that the government will introduce a financial support package to landlords to help them achieve the right result for the EPC register. As soon as we have news on the £10,000 maximum spending cap per property, we’ll bring it to you in our blog.
We provide general advice to HMO landlords on the type of upgrades they can use to upgrade their property to receive an EPC “C” rating.
To find out more about HMO Architects and our HMO-focused design consultation service, please don’t hesitate to contact us.