Rent increases will not be necessary to meet new EPC standards, according to Labour

An official consultation on Labour’s Energy Performance Certificate (EPC) targets stated that they may cause landlords to raise their rents, among other risks to the private rental sector (PRS). However, a Labour spokesperson stated that this would not be the case.

Labour recently streamlined their objective for all PRS properties to meet an EPC grade of ‘C’ or above by a uniform deadline of 2030.

There are almost 3 million PRS properties with EPCs of ‘D’ or below. The prospect of landlords increasing rents on their properties to help pay for energy efficiency upgrades has been a major source of criticism of Labour’s plans. 

Many landlords and PRS professionals have strong views on this topic, and may feel that Labour’s current position is dismissive towards their valid concerns.

Conservative questioning

Conservative MP Paul Holmes questioned if the government had accurately assessed the costs of new energy efficiency targets, and the impact these will have on open market rents.

In response to this, the Parliamentary Under-Secretary of State for Energy Consumers, Martin McCluskey, stated that landlords would not need to increase rents when the targets come into force.

McCluskey alluded to the official consultation, but concluded that lower energy bills for tenants would negate any increased costs to bring properties up to the higher energy efficiency standards:

The government recently consulted on increasing minimum energy efficiency standards in the domestic private rented sector, including proposals for rented homes to achieve Energy Performance Certificate ‘C’ or equivalent by 2030.

We have engaged with landlord and tenant groups in developing this policy and set out several proposals to help landlords reach the new standard.

Our proposed changes should not require landlords to increase rents. Instead, they will help tenants cut their energy bills by delivering more energy-efficient homes.

The consultation states that, when weighing up their finances, some tenants may find that lower energy bills offset any rent increases, and therefore decide to stay in their properties.

Blind to the risks?

McCluskey did not acknowledge the consultation’s concerns that landlords in more difficult financial circumstances may choose to exit the market, rather than bring their properties up to the new standards.

The consultation documents say:

Landlords may decide to exit the market. The likelihood of this is dependent on the current profitability of their rental property, the level of costs they face, the price landlords would receive from the sale of their property and their wider financial circumstances.

The prices of EPC ‘F/G’ PRS properties affected by the current regulations (requiring PRS properties to be EPC ‘E’) decreased by about £5,000 to £9,000, relative to unaffected properties.

If a similar situation were to arise in the context of higher Minimum Energy-Efficiency Standards (MEES), landlords may decide it is more profitable to improve properties and remain as landlords. However, landlords who face the highest costs may decide, on balance, it is still less costly to sell their property than comply with the higher energy performance standard.

Wider political pressure

The next UK general election is scheduled to be held no later than August 2029, roughly a year before the EPC deadline. However, there is now serious concern that Labour may not be the government to see it through. 

Labour are currently under extreme political pressure from all sides because of Labour peer Peter Mandelson’s alleged leak of sensitive government information to disgraced financier Jeffrey Epstein. These allegations proved severe enough to warrant a police investigation.

After Starmer promptly sacked Mandelson from his position, Starmer’s former political director Luke Sullivan stated that the Prime Minister is currently “fighting for his premiership”, due to the severity of the situation.

Several Labour MPs, including Rachael Maskell and Rebecca Long-Bailey, sharply criticised Starmer’s appointment of Mandelson. 

Across the aisles, leaders of several major parties – including the Conservatives, Liberal Democrats, Reform and the Green Party – have piled pressure on Starmer to resign, or be faced with votes of no confidence from MPs. Conservative leader Kemi Badenoch said that “it’s a question of when, not if, he goes”.

Back in September, we covered Angela Rayner’s shocking resignation from the role of Housing Secretary. Rayner was quickly replaced by Steve Reed, who did not significantly alter Rayner’s existing plans for the PRS.

However, a potential change of leadership could leave these plans more uncertain than ever. We will keep you updated on how the government responds to this crisis.