Is Retrofit The Next Step For Your Portfolio? We’ve Got The Tool For You!
Given there has been a lot of sustained media attention surrounding energy efficiency and sustainability, we recently spoke to Heather Cara, Private Rented Sector Senior Manager at Lloyds Banking Group, to discuss her work with landlords to improve quality in the private rented sector.
When it comes to the intricacies of Energy Performance Certificate (EPC) ratings and uncovering opportunities for investors to save with grant funding, understanding the benefits of retrofit (in a nutshell improving the energy efficiency of an existing home) can be pivotal to renter satisfaction, greater compliance, and the profitability of your portfolio by unlocking more competitive rates and strengthening the home’s value.
That being said, we understand that it can feel like a maze when trying to decipher what improvements can be made to a property, what impact various upgrades would have on your EPC rating and most importantly whether you may be eligible for a governmental grant to cover the costs of any work.
Therefore, we caught up with Heather – who has kindly offered to shed a little light on easy ways to identify retrofit opportunities and introduce BM Solutions’ brand new Landlord Retrofit Tool, which can give you all the answers in just a few clicks.
Hello Heather, thanks for joining us, we’ve got just a few questions for you…
In your opinion, why do you believe sustainability is such an important topic for landlords in 2024?
From speaking to landlords, I know they care and are invested in providing good homes for their renters. I’m encouraged by how many landlords have continued to be engaged on the topic of sustainability, despite uncertainty over the future of minimum energy efficiency standards in England and Wales. I think these landlords should be applauded. Looking ahead, I expect a revisit of energy efficiency regulation for the sector, particularly with a general election and changes to underlying EPC methodology on the horizon.
We’ve seen the Scottish government publish new proposals for the minimum energy efficiency of privately rented homes, listing certain measures that a home should meet (where feasible) by the end of 2028. I expect this could be the direction of travel for the rest of the UK in time, so landlords can pre-empt some of the rush on materials and trade if they get a head start today, and plan what improvements to make and the associated costs.
What current sustainability trends do you not see going away any time soon?
We’ve all seen the increased attention on the conditions of properties in both social homes and the private rented sector in the last couple of years, and I don’t think that’s going to go away as regulatory reform continues to sweep across the UK. Research shows that peoples’ life outcomes are detrimentally linked to the quality and security of the home they live in, with effects on a person’s mental and physical wellbeing, their ability to put down roots in a community, the educational attainment of their children, and levels of crime in their local area.
Although “sustainability” – or energy efficiency – is one aspect of overall “quality” of a home, it has strong links to other factors that demand a landlord’s time such as damp and mould, and ensuring there are no hazards in their homes. Therefore, landlords and housing professionals should embrace improving the energy efficiency of homes as it could help to solve some of the wider challenges they are obligated to address.
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Can you introduce us to the BM solutions’ new Landlord Retrofit Tool and how it can benefit landlords looking to upgrade?
Yes – I’m thrilled to share our recently launched Landlord Retrofit Tool with landlords and brokers. By answering a few questions about a home, and the potential budget for any improvements, our tool will create a personalised retrofit action plan for a landlord. It’s important to note that the accuracy of the tool is dependent on the answers given, and it creates a modelled EPC. Therefore, we still recommend that landlords should get an official EPC assessment and certificate. Our tool allows a landlord to add or remove improvements from their action plan, and get an indication of how this will affect their EPC. The tool also links through to our new grants page which outlines the schemes and funds available to landlords or their renters across the UK. We’ve found landlords really value this information – who wouldn’t want to know about free financial support?
On top of these benefits, the action plan will give a landlord a range of measures from low-cost improvements to more substantial installations. Landlords may be surprised by the impact some of the cheaper, less invasive measures can have on their EPC. Speaking to landlords, we understand that some have an ongoing maintenance plan for each of their properties, and these measures can slot in nicely with that existing schedule. For example, when the landlord is next decorating, they could install draft proofing around windows and doors. We’ve also heard that the payback period on some of the costlier measures is not so much a barrier to them as is the case in the owner-occupied space, as landlords are less likely to pay the energy bills, and often invest in higher ticket items such as kitchens and bathrooms without thinking about a payback other than maintaining the property value. In fact, recent Rightmove research has highlighted that improving the EPC of a home from the UK average of a D to a C can increase the value by 3%, or over £11,000 based on average house prices. Definitely something to think about for landlords wanting to achieve capital growth.
Finally, we know renters want warm dry homes with cheap energy bills. Landlords that make energy efficiency improvements to their properties can be more confident that their renters will continue to be able to afford their rent, and that they can attract future renters.
When speaking with landlords recently, what have you found has surprised them most when it comes to EPC changes?
The biggest surprise to them is the number of grants that they or their renters may be eligible for. Across the nations of the UK there are government and energy company schemes, with eligibility criteria based on the property, the landlord, or the renters. I’m sure there is untapped potential here, with many landlords unaware of what’s on offer, here are a couple of examples:
- Energy Company Obligation scheme (ECO4) is available in England, Wales and Scotland. Under this scheme your renter’s energy supplier might offer money off a replacement boiler and wall or loft insulation for free, or ask for a contribution. Eligibility is dependent on properties having an EPC of E, F or G, and renters qualifying for certain benefit allowances, including universal credit, child benefit and housing benefit. Given that 1 in 4 renters in England receive housing benefit, there’s a massive opportunity for landlords and their renters to make the most of this scheme.
- Great British Insulation Scheme (GBIS) is also available in England, Wales and Scotland. Under this scheme landlords can apply for free or cheaper insulation if their property has an EPC of D-G, and a council tax band of A-D in England, or A-E in Scotland and Wales.
For more information on these grants and more, check out our new grants page. It’s also worth noting that some local authorities also offer their own grants or interest free loans for energy efficiency improvements, so do check out your local council website.
What impact do you see energy rating improvements having on the wider Private Rented Sector?
One thing I’m starting to understand more is the link between making energy efficiency improvements and the impact on damp and mould. We know that damp and mould can be a recurring bugbear for renters, and can have serious impacts to their health. We also know damp and mould demands landlords’ time and money and can impact property value. Landlords that work to improve the energy efficiency of their rental homes will lower their renters’ energy bills making it easier for their homes to be adequately heated and in turn reduce the incidence of damp and mould.
Thinking more specifically about mortgage finance – there are now many lenders, including ourselves, that offer incentives for landlords to have more energy efficient rental homes. At BM Solutions we offer preferential rates for landlords purchasing or remortgaging properties with better EPC ratings. Definitely something to think about in a landlord’s costs/benefits decision on retrofit, and certainly an option to consider if coming up to the end of their fixed product.
If landlords want to know more, what initial steps do you recommend? Where can they get started?
The starting point should be understanding your property’s EPC rating. To legally let a property, you need to have a valid EPC for it, and in England and Wales that has to be a minimum of E, unless exempt. You can find your property’s EPC on the Government’s EPC register, however if you’ve recently carried out improvements, it can be helpful to get a new assessment carried out to take into account the works done, and the updated energy costs.
It’s important to understand the tools, grants and resources that are available to you when it comes to retrofit. We’ve pulled a lot together on our consumer website explaining the latest on EPC regulation, and of course there’s our new Landlord Retrofit Tool to support you to make a plan of improvements.
The next step would be to understand the funding options available to you to support your retrofit activities – using savings, grants and/or finance. Remember to check out any support your local authorities are offering landlords or their renters. And of course you’ll want to contact the brilliant The Buy to Let Broker team to advise you on your individual financial circumstances.
Lastly, what do we not know about Heather Cara on a personal level?!
I’ve from a very analytical background – I studied Maths at university and worked in our Risk function for 7 years. Now I’m in a more strategic role, I’ve found myself getting my analytical kicks from researching my family tree – using records and DNA results to piece together as much as I can.
Thank you so much for those invaluable insights Heather, we know that many of our landlords will have found that useful. Plus, to make it even easier to find further information on grants and retrofit for your properties, here are all those useful links once more:
