Landlords seek finance solutions as EPC upgrade costs top £11,700
Landlords are increasingly looking to lenders for support as they prepare for potentially costly energy efficiency upgrades, according to the latest Landlord Trends research from Pegasus Insight.
The research 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, creating what could become one of the biggest financing challenges facing the private rented sector in the coming years.
With 60% of landlords owning at least one property rated below EPC C, the scale of the potential investment requirement is significant.
Despite the cost, landlords are not shying away from the challenge. Nearly two thirds (62%) of those affected say they intend to carry out the necessary improvements, up 13% on the previous quarter, suggesting there is increasing appetite to invest in improving the quality and energy efficiency of rental housing.
The key question, however, is how those improvements will be funded.
While more than two thirds of landlords expect to use savings to cover at least some of the costs, many are already exploring alternative funding options. Almost one in four 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 financing requirement across the Private Rented Sector (PRS) as landlords seek practical ways to fund energy efficiency improvements while maintaining the viability of their investments.
Importantly, the drive towards higher energy standards is not being driven solely by regulation. Separate Tenant Trends research from Pegasus Insight found that 44% of renters consider EPC ratings an important factor when choosing a property.
The research highlights a clear opportunity for lenders to support landlords through the transition.
When asked what would make EPC improvements more achievable, landlords identified a range of financial solutions including further advances, dedicated green finance products, preferential rates for energy-efficient properties and simpler access to funding for retrofit projects.
The findings suggest that access to suitable finance could play a critical role in determining whether landlords proceed with upgrades, increase rents to recover costs or choose to exit the sector altogether.
Mark Long, founder and managing director of Pegasus Insight, commented: “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.”