Might Tenants Finally Start Caring About EPCs In 2012?

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Might tenants finally start caring about EPCs in 2012? The birth of the Energy Performance Certificate (EPC) was unexciting and confusing.

EPCs became compulsory for rental property in October 2008. The EPC came in two forms: an ‘A’ to ‘H’ rating graph which had to be displayed with each property’s description online and on brochures and a longer report which must be made available to anyone who asks for it

However the proud parents (the Government) did nothing to herald the arrival of the EPC into the world. The lack of communication was a problem.

The result: applicants (prospective tenants) and landlords had no idea what EPCs were. The latter found out the hard way. Letting agents across Britain had to justify why landlords had to pay £60-90 for this new ‘EPC’ even though no applicants wanted to look at it. Marvelous.

From 2008 to 2011 very few tenants asked for the full EPC report. One of our offices went a whole year without one single request. EPCs were ignored by tenants and resented by landlords, which was not ideal given the noble intention of improving rental accommodation and reducing energy consumption.

In 2012 we think this will change. A bit. As with many behaviour changes, money is the driving force.

Today people are worried about running costs and are starting to ask for the full EPC report as a proxy for these costs. Gas and electricity bills have risen so greatly in proportion to salaries that the energy efficiency rating of a home is – finally – becoming a subject of discussion for those searching for a new place to live.

A case in point: in autumn 2011 we found an applicant their ideal home, a 3 bedroom semi-detached house in Banbury, Oxfordshire. The rent was within budget, the location perfect for commuting, yet the home was rejected solely because of its electric heating and ‘F’ rating on an EPC.

Although energy efficiency is still a minor criteria compared to location, price, size, quality, etc, we are seeing handfuls of people examining the EPC which is progress in itself.

However, the EPC as a proxy for “running costs” is not without issues: the ‘A’ to ‘H’ rating is a blunt instrument; it does not quantify the costs involved in pounds sterling; and two homes with the same rating may feel very different in winter.

EPCs will start to justify their existence in 2012 but there will still be frustrated applicants who want the exact running costs to decide if they can take a home. [Be warned, estimating these costs is dangerous for agents and landlords: people differ greatly in how warm they want their homes, and if you mislead tenants about costs then all hell tends to break loose.]

So what do landlords think about this? Our recent survey of 150 landlords shows that opinions are mixed:

53% do not know their EPC rating
59% think that EPCs are a good idea
33% have made some form of energy efficiency upgrade to their property.
And the reasons for this investment can be seen in Figure 1 of our Tenants & EPC ‘s pdf . These ‘early adopters’ have been driven by both ideals and practicalities.
Loft insulation is the most popular item which landlords are considering investing in (Figure 2)
When asked “What would make you more likely to take action?” our respondents cited the (stunning) lack of tax incentives available to landlords. (Figure 3)

The lack of upside for landlords is a problem. Without good tax incentives and until demand for energy efficient homes increases to a crescendo, large-scale retrofitting of the private rental sector will not happen.

The Green Deal is a long way off still – in the meantime expect evolution not revolution.

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