Seizing the £3 billion opportunity for landlords and agents

• Kamma estimated that around 2.9 million PRS properties will need to be improved to reach MEES C by 2025 for a whopping total of £29 billion.
• This challenge for landlords creates a new way to provide an improved service for agents, with just a 10% referral fee creating a £3bn market for those able to effectively support.      
• By providing advice and support on the best improvements and a trusted service with a guarantee of delivery (or at least more recourse should things go wrong), agents can both offer an improved, differentiated service, whilst tapping into a £3bn opportunity.

The challenge

The UK residential property sector of around 30 million homes contributes to 22% of the country’s emissions. Bringing this number down will prove challenging as British homes lose heat up to three times faster than those across Europe. Moreover, 80% of the houses that will be occupied in 2050 have already been built, with most requiring significant upgrades to achieve the required energy efficiency standards.

Retrofitting the vast majority of UK homes with fabric first upgrades, energy-efficient appliances and low-carbon heating systems is a major and costly challenge that must be addressed in order to reach Net Zero by 2050. However, considering the scale of this problem, there’s a growing concern that government grants and large scale retrofitting projects won’t be enough, putting landlords under immense pressure to fund improvements themselves. Lack of preparation could mean long void periods, as an increase in Minimum Energy Efficiency Standards (MEES) from E to C will shut out landlords and agents who haven’t identified and made the necessary upgrades to under-performing properties.

Kamma has previously estimated the cost of compliance at £29 billion, a huge cost to pay for the Private Rented Sector (PRS). Yet this amount needs to be spent in order to ensure the UK reaches its legally-binding commitment of Net Zero by 2050. This challenge for landlords creates a new way to provide an improved service for agents, with just a 10% referral fee creating a £3bn market for those able to effectively support.       

The scale of the challenge

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 PRS properties will need to be improved, with an estimated average cost of £9,872 per home for a whopping total of £29 billion. Given this, many landlords and agents will struggle to finance the improvements before 2026. 

The scale of the issue becomes larger when we consider the size of the UK’s retrofitting industry and the resources at our disposal to tackle over half of the country’s private rental properties in such a short timeframe. 

The state of the retrofit industry 

Considering the scale of the challenge and the figures above, this means that the country’s retrofitting industry will need to increase by about ten times its current size to decarbonise those almost 30 million homes at a rate that aligns with wider Net Zero emissions targets.

To scale the retrofitting industry accordingly, a large investment from the government along with a clear plan and innovative solutions are required. In addition to this, Kamma suggests that letting agents could play a pivotal role in optimising the retrofit industry to help the private rental sector meet these regulations.

Solving through scale: the retrofit opportunity     

A crisis demands innovative thinking and Net Zero is no different. Some local authorities are already doing their part by buying at scale and securing discounts for their constituents. For example, Merton Council is supporting their residents to upgrade to solar panels, making it cheaper and easier for residents whilst also offering the benefits of a single customer contact and larger contracts to the retrofit industry. It is this blueprint that could provide the clues to supporting the PRS.

This would simplify the challenge as letting agents manage large numbers of properties and can offer scale and operational simplicity to the industry. They also hold a key relationship with landlords and have a legal responsibility to uphold standards and regulations. Agents can also act as expert consultants, providing the education, data and support needed to find the most cost effective routes to compliance. The steps to take here are not straightforward with the cost efficiency of solutions ranging from £2.36 per increase in SAP point for hot water cylinder insulation to £4,277 per increase in SAP point for solar water heating. Regulation is also complex, with exemptions available based on cost, or the status of the building. There are even examples of landlords working hard to improve properties, only to be told to reverse these upgrades due to unexpected local legislation. Solving complexity is yet another opportunity for agents.

The fragmented nature of the retrofitting industry is also a challenge as landlords often don’t have a preferred supplier. Many landlords have horror stories of works gone wrong and, with such substantial costs involved, will be looking for suppliers they can trust to deliver. A supplier working to fit multiple homes as more to lose if things go wrong and a larger interest, therefore, in delivery. By providing a trusted service, and one with real repercussions should the project not complete, agents can offer yet more utility to their landlord customers

Conclusion

Net Zero provides both challenges and opportunities. The UK’s housing stock is one of the oldest in Europe, millions of homes require improvements, and the retrofit industry is (so far) under-prepared to meet this challenge by 2050.      

Yet letting agents are in a unique position to support their landlords. By providing advice and support on the best improvements and a trusted service with a guarantee of delivery (or at least more recourse should things go wrong), agents can both offer an improved, differentiated service, whilst tapping into a £3bn opportunity.

Contact us or book a demo now to understand how Kamma can solve property licensing for you.