Published 4th October 2021
The UK residential property sector contributes to 22% of all UK emissions. With COP26 just a few weeks away, there is a huge amount in the legislative pipeline designed to tackle this problem. Earlier this year the government passed the first reading of the Minimum Energy Efficiency of Buildings Bill that, once passed into law, will affect millions of landlords and agents across the country.
As has been reported several times over the bill will increase MEES (Minimum Energy Efficiency Standards) to EPC C in 2025 for new lets, and 2028 for all lets. What’s often overlooked is that this change would come into effect on 31st December 2025. It is therefore 2026 which could prove to be an extremely testing year for landlords who have not made enough progress with their energy efficiency improvements. Lack of preparation could meanlong void periods and even a shutting out from the rental market for landlords who choose to not foot the bill. It is now in the preceding years that landlords will need to ensure they have already made sufficient improvements if they wish to start a new tenancy in 2026. So what should agents be doing differently to prepare for this change?
When MEES changes to C, around 58% of the private rented sector will no longer be allowed to let. In a previous report, Kamma estimated that around 2.9 million homes will need to be improved, with an estimated average cost of £9,872 per home. Given this, we know that many landlords will struggle to finance the improvements before 2026. For example, this month a survey by the Mortgage Works revealed that more than a third of all landlord respondents said they were not confident they will be able to bring their properties to the required EPC standard. This will also have a dramatic impact on letting agents who could face the loss of almost 60% of their inventory, or continue to let those properties and risk thousand pound fines for non-compliance.
However, it is not that simple to say 60% of all agents’ properties will no longer be eligible to let, in fact there are great regional differences in energy efficiency, which national regulation often overlooks. This is exactly what is happening here. Kamma’s analysis of the EPC register shows there is a higher proportion of energy inefficient properties in the North than in the South. Yet, the energy efficiency regulations are the same across the country, leaving the North with the biggest retrofit bill to pay and agents far more likely to be affected by the tightened regulations.
So why is it important that agents already start to prepare for the new MEES regulations when they are yet to be passed into law? For once, industry experts all over the country seem to agree that the new regulations will be implemented and are here to stay. As David Cox from Rightmove said in our recent webinar, “Yes, I think the new MEES regulations will be implemented soon, as all governments are focused on trying to tackle climate change and are signed up to those protocols [Kyoto climate protocol]. I think it would be naive of landlords to think that these will go away.” Secondly, agents who are prepared for the change stand to win more instructions through displaying expertise to landlords. After all, regardless if the new MEES are implemented or not, the climate agenda is here to stay.
The size of the cost is a problem in it’s own right, but it also generates further issues when it comes to resourcing these retrofits. Landlords will be competing with homeowners, and each other, for access to builders to make these changes and the most prepared will be planning now and avoiding the rush later on. It’s worth considering the legislative timeline and building a comms plan that aligns with it. Anticipating the regulatory challenges is one way to get ahead of the competition.
Market and regulatory complexity can offer a chance for the best agents to stand out from the competition, increase the customer offer and create new revenue streams. An increase in MEES is no different as landlords will be looking for expert advice, and trustworthy partners. Not only does this increase the value a good agent can offer, it also allows them to make a referral fee for connecting their landlords with trustworthy tradespeople. With around 60% of properties requiring improvement, this will deliver a substantial revenue opportunity for even modest portfolios. At the same time, agents will help support the UK property sector’s path towards Net Zero.
To ensure a smooth transition when the new MEES regulations come into place at the end of 2025, letting agents need to start preparing for this by considering the legislative timeline and adapting a plan that supports this move.
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