Landlords are increasingly looking to lenders for support as they prepare for the cost of improving rental properties to meet proposed energy efficiency standards, new research suggests.
Research from Pegasus Insight has found that landlords estimate it will cost an average of £11,713 per property to bring rental homes up to the proposed EPC C standard, highlighting what could become one of the largest funding challenges facing the private rented sector in the coming years.
The study found that 60% of landlords own at least one property currently rated below EPC C, underlining the scale of the potential investment requirement across the sector.
Despite the anticipated costs, landlords appear willing to invest. Almost two thirds (62%) of those with properties below the proposed standard said they intend to carry out the necessary improvements, representing a 13% increase on the previous quarter.
However, the research suggests that funding remains a key concern. While more than two thirds of landlords expect to use savings to cover at least part of the cost, many are also considering alternative sources of finance.
Almost one in four landlords said they hope to access government grants or support schemes, while others expect to rely on additional borrowing, further advances or equity release from existing properties.
The findings point to a potentially significant demand for specialist funding solutions as landlords seek practical ways to finance energy efficiency improvements while maintaining the viability of their portfolios.
The research also indicates that demand for more energy-efficient homes is being driven by tenants as well as regulation. Separate Tenant Trends research from Pegasus Insight found that 44% of renters consider EPC ratings to be an important factor when choosing a property.
Landlords identified a range of measures that could help make energy efficiency improvements more achievable, including further advances, dedicated green finance products, preferential rates for energy-efficient properties and simpler access to retrofit funding.
The findings suggest that access to suitable finance could play an important role in determining whether landlords proceed with upgrades, increase rents to offset costs or leave the sector altogether.
Mark Long, founder and managing director of Pegasus Insight, said: “For many landlords, the question is no longer whether properties need to become more energy efficient, but how those improvements will be funded.
“Most landlords are willing to invest, but the costs involved are substantial. Our research found that landlords believe energy efficiency improvements become financially unviable at around £9,000 per property, yet they estimate the cost of achieving EPC C will average almost £12,000. That leaves a significant funding gap.
“Many landlords are actively looking for financial support to bridge that gap, creating a significant opportunity for lenders to help unlock investment across the PRS.
“The most successful solutions are likely to be those that make retrofit funding simple, accessible and commercially viable for landlords.”
With landlords increasingly weighing up how to fund future energy efficiency works, the research points to growing demand for lending solutions designed specifically to support retrofit projects and EPC improvements across the private rented sector.
