The Renters’ Rights Bill and upcoming legislation around Energy Performance Certificates (EPCs) for rental properties could have several unintended consequences, such as rising rents, “uninhabitable” properties and a shortage of properties for first-time buyers.
Speaking at the British Specialist Lending Senate, Steve Cox, chief commercial officer for Fleet Mortgages, said: “It’s going to make it harder for landlords to review rents and evict tenants, so ahead of the curve, you can see an unintended consequence where there are landlords out there that don’t charge market rate for long-standing tenants because they’ve got a good relationship with them.
“An unintended consequence, as this plays out, [is landlords are] also going to be forced to increase the rent to the market rent, because they may see it as this is the last opportunity to be able to do this. It’s much harder in the future, so that isn’t going to be particularly helpful for tenants.”
Regarding upcoming legislation around EPCs, Cox said the “execution of this is going to be very, very difficult for all involved”.
The government is currently undergoing a consultation on reform, but the suggestion is that existing tenancies should reach an EPC C by 2028 and all tenancies should hit this by 2030.
He explained: “In Croydon, there’s a lot of Victorian conversions. If you’ve got a Victorian conversion, the ability to get that to an EPC rating of C is tough. Say you own one in a converted block of four or five flats, and you’re going to find it difficult [to get to] a C. Are we seriously saying that becomes uninhabitable? That’s nuts.”
Shaping the mortgage market around today’s first-time buyer
Sponsored by Newcastle for Intermediaries
Cox added that another unintended consequence was that landlords were “gravitating towards new builds that have an EPC rating of A, B or C”. These new-build properties have usually been intended for first-time buyers, so this could be “another issue”.
Karen Rodrigues, chief sales officer at Market Financial Solutions, added that a government report from 2020 estimated that upgrading a property to an EPC C rating was going to cost around £7,787.
However, of the people that went through that process, around 10% found that it cost them around £15,000.
“The government figures are wildly out. Around 39% of the property in the housing stock currently, which is an EPC C or above anyway. The question is, you’ve got the government saying, on one hand, we’ve got to have this regulation, we do need to change it, however, it’s doing it rightly and at the right time and in the right way.
“Will they kick the can down the road? They’ve done it before. As we get closer and closer to that date, who knows,” she said.
EPC legislation opportunity for advisers
Cox said these two pieces of legislation are “enough for all stakeholders in the industry to cope with, whether you’re a landlord, whether you’re an adviser, whether you’re a letting agent, or whether you’re a lender”.
He warned: “If we go too much further than that, then we might start really impacting the PRS, and then we’ve potentially got a situation where people haven’t got anywhere to live.”
Cox said EPC legislation was “not going to get scrapped”, adding that it would be implemented, but “as it seems to be shaping up, it seems very difficult to execute in the mooted time frames, whether you’re a landlord or a lender”.
“The only good news is it’s an opportunity for advisers, as presumably landlords that want to refinance and re-gear their portfolios to finance this work; they won’t be able to do that without expert advice,” he said.
