Labour has unveiled its plans to fund EPC upgrades in private rented homes. Here, we look at how the scheme will work and how to check whether you’re eligible for the funding.
EPCs seem to be a never-ending point of contention and confusion for the PRS. With governments changing goalposts and deadlines, it’s no wonder many landlords have forked out the costs themselves to increase their EPC rating to a C to avoid any fines or unreasonable timescales.
However, many property investors await greater clarity and funding options before tackling the costly task. Under the Conservative government, the plans (since scrapped) involved all tenancies meeting a minimum EPC rating of C or above by 2028, yet we never really received a complete plan for exemptions and grant options.
Now, Labour has unveiled its green plans for the PRS: all rented properties will need an EPC C rating or above by 2030. The scheme will see the government fund the works (up to £30,000) on rented homes to better support the property sector in reaching the target.
How Labour’s EPC scheme will work
The devil is really in the details for this one, particularly around eligibility. The funding will apply in “eligible postcode” areas across almost half of the UK, centralised around where older properties (think pre-1919 housing stock) are most common, as these are the most expensive to upgrade. This funding will then be split equally between two types of upgrades:
- Improvements to energy efficiency within the property
- The installation of low-carbon heating equipment (i.e., solar panels or air-source heat pumps)
Up to £30,000 will be available to landlords with just one property to complete the works needed to upgrade the EPC rating.
However, if you own two or more investment properties, you will have to fund 50% of the costs on all subsequent properties within your portfolios. The government will fund half the required costs (up to £15,000), and you will need to pay for the remaining balance.
It’s unclear whether £30,000 will be set as a spending cap, with exemptions for properties that need work costing above this threshold.
Can I access the funding?
The scheme is postcode dependent, covering 440,000 postcode areas from the total 900,000 across the UK. There are some exemptions that make the scheme more complicated to navigate. Eligibility is based on:
- Postcode
- Landlords with low-income tenants on benefits
- Landlords with tenants where the household income is below £36,000 (depending on family size)
- Properties currently with an EPC rating of D to G
Landlords only need to meet one of these four ‘pathways’ (postcode, benefits, or tenant income) to be eligible.
Industry reaction
Nigel Lewis of LandlordZone comments: “Labour’s more environmentally-friendly approach to managing the UK housing stock means millions of landlords will get access to substantial funds to upgrade their homes via the Warm Homes scheme, albeit with some strings attached, but nevertheless a very different approach than the more cautious approach taken by the previous government.
“The main challenge will be for landlords with more than one property, who will have to foot the bill for half the spend under the scheme for any subsequent properties, and this will represent a major funding headache for them as the new minimum EPC band C requirement in 2030 looms. That’s only five-and-a-bit years away.”
How you can finance EPC improvements
Plenty of other finance routes are available if you’re concerned that you may not be eligible for Labour’s funding options. For portfolio landlords facing EPC upgrades on several properties, reviewing all your options is crucial to help ensure you make the best-informed property investment decisions.
The three main ways to finance upgrading investment properties to an EPC C are:
- Remortgage with capital raise
- Further advance
- Short-term finance (bridging)
A remortgage with a capital raise may be the best way to fund the works. If your portfolio has sufficient equity, you could release capital from your properties to fund the necessary works. This is a fairly common and straightforward process, but choosing the right property to capital raise against and navigating early repayment charges (ERCs) can become difficult. Speak to our expert brokers, who can help you secure the right property finance.
If you face high ERCs with a remortgage, a further advance may be a better solution. This is where you take an additional loan from your current lender, which will last the same time as your existing mortgage at a new rate. It’s worth noting that your initial mortgage rate will remain on the original loan, but your further advance product may be more expensive. Our brokers will be able to calculate whether it’s more cost-effective for you to remortgage and pay your ERC penalty fees or take out a further advance.
Another route to consider is a bridging loan. As a short-term finance option, bridging is a great choice for those looking to make quick improvements to a property before letting it out to tenants or before your next mortgage is due.
To find out the best way to finance your EPC improvements, have one of our experts complete a FREE property portfolio review.
