A government consultation issued in February 2025 sought views on the proposed changes to the energy efficiency regulations as they affect private rented property. The private rented sector (PRS) has been subject to MEES since 2018, which requires all properties to have a minimum Energy Performance Certificate of E, subject to a valid exemption.
The government is proposing to strengthen these regulations further by introducing new metrics against which to judge a building’s energy efficiency. If adopted, these higher standards (which have been likened to meeting an EPC C) will affect farming businesses that have converted redundant farm buildings into rentable dwellings.
What are the proposed metrics?
Currently a property’s energy usage is the basis for an EPC rating. The new basis for assessing MEES will rest on three metrics designed to maximise the overall energy efficiency of the building and reduce its running costs: fabric performance, smart readiness and the heating system.
Fabric performance. This will be the primary standard to meet as it is the most likely to deliver cost savings for tenants. As the name suggests, this covers insulation, draught proofing, double glazing and anything else that will improve the thermal properties of the building.
Smart readiness. This metric will judge the degree to which a building’s energy efficiency can be improved by using tools such as solar panels, battery storage and smart meters.
Heating system. This looks at the energy costs per sqm of the building and considers the energy costs for heating, hot water, lighting, pumps, fans and anything else needing an energy source. This may also include energy requirements of cooking appliances. Possible measures could include better insulation, more efficient gas boilers, and solar panels.
What will landlords be required to do?
The consultation proposes three options for setting the standard against these metrics. The government’s preferred option is for landlords to invest in loft and cavity wall insulation, double glazing and the like (the fabric performance metric). After doing everything possible under this metric, landlords can then choose to invest in either the smart readiness metric or the heating system metric depending on which would be most appropriate for the property. New or newly converted properties will probably meet the fabric performance standard, leaving landlords to choose between investing in either the smart readiness or heating system standard.
Financial obligations and timings
Currently, the amount landlords are required to spend to reach the minimum EPC ‘E’ is capped at £3,500 (including VAT). Under these new proposals, given that the investment requirements are greater, it is proposed that the investment cap should be £15,000 (including VAT) per property but this would not be linked to inflation. Properties that would cost more than the £15,000 cap to upgrade would be exempt and the government is proposing extending the exemption period to 10 years (up from the current five years). In terms of timing, the government is proposing that new tenancies must achieve EPC ‘C’ by 2028 and existing tenancies by 2030 but with transitional arrangements in place.
Will the adoption of new standards improve rentability?
It would be naïve to ignore the impact on tenants of the rise in the cost of living, of which household bills play a significant part. Upgrading properties to a standard that results in lower bills for tenants will almost certainly make them considerably more rentable. However, with many farm budgets so constrained, the proposed increase in the investment cap may render any upgrading unaffordable. The consultation closed at the beginning of May so we will report back on the government’s response later this year.
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