"Being realistic, a lot of the UK’s housing stock was built over a hundred years ago in a very different time and therefore will require work to get it up to the new EPC level."
With the recent COP26 Conference dominating the media narrative, there is a considerable amount of interest and debate in the mortgage and housing markets about what can be done to improve the energy efficiencies of our housing stock and how we can all play our part in reducing carbon emissions.
Much of the recent focus has been on the private rental sector, with landlords effectively being asked to lead the way in terms of improving the energy performance of their properties in line with higher Government regulations.
Currently all rental properties require an EPC level of E and above to be suitable for letting, but new regulations due to come into force from 2025 will set this bar higher at an EPC level C.
This presents several challenges for landlords, particularly professional operators with multiple properties, who will need to think very carefully about their current EPC ratings and what improvements might be required over the next few years to meet to the higher C rating.
Part of the reason for Recognise Bank launching into the professional buy-to-let (PBTL) space this year was to help and support landlords in all facets of their investment, to lend on high quality portfolios and properties, and to help borrowers through the finance process, as well supporting them around what might be coming.
The issue of energy efficiency, and the specific changes to EPC levels, certainly falls into this space. With our relationship manager approach to lending, we can drill down into the specifics of the portfolio and work with investors to make them aware of their requirements and to plan for any future spend they may need to bring the properties up to expected standards.
Advisers and brokers with these types of clients will be acutely aware of the support they can require, especially when they are dealing with multiple units in blocks or larger rental properties, for example. Being realistic, a lot of the UK’s housing stock was built over a hundred years ago in a very different time and therefore will require work to get it up to the new EPC level.
There is no better time to start this conversation with property investors than during the lending process, because the requirements are likely to have a knock-on impact on a number of areas, not just the funds required to carry out the work, but also in terms of LTV, value, rental income and yield.
From our early forays into this sector with our PBTL product, both landlords and advisers seem appreciative of a lender that is considering these aspects and is working closely with the client to identify any potential issues and how they might be addressed.
That seems to be a good pathway to follow as a responsible lender lending on these portfolios, especially when there can be an array of complex circumstances and needs. Our belief is that by having our relationship-led approach, with our teams working through the case with the adviser and the client, we can educate and support and be there for the entire term, not just treating this as a transaction where the contact ends at completion.
The direction of travel with government led improvements is not going to change and the more we can do as a lender to support advisers and their professional clients, the more likely we think they will be able to meet those standards and help landlords to continue operating profitable portfolios for many years to come.