New EPC targets may stifle buy to let investment, says ARLA

19 February 2021 | Renting

New EPC targets may stifle buy to let investment, says ARLA

ARLA Propertymark is warning the government that new energy efficiency targets for EPCs could stifle buy to let investment in future.

In a response to an official consultation, the organisations says lending criteria by mortgage firms with buy to let customers may not coincide with proposals to get landlords to fund energy efficiency improvements. 

For example, the government proposes an average target of EPC band C by 2030 for properties, with maximum spending per property to achieve this of some £10,000.

Advertisement

There is a suggestion that mortgage companies could be used by government to raise rates on products for properties which fail to meet such deadlines – or even have preferential rates for properties with higher EPC levels. 

There is a belief this could particularly hit prospective buy to let mortgage borrowers, especially if the size of future BTL mortgages had to include up to £10,000 extra for energy improvements. Propertymark feels this may be a disincentive and the prospective buy to let investors could just walk away instead. 

As an alternative, Propertymark wants to link improved energy efficiency with property taxes.

This could include using tax breaks such as making energy improvements exempt from VAT, and/or offering lower rates of council tax for properties that have been made more energy efficient. The organisation also suggests an adjustable rate of property tax tied to energy performance, thus shifting buyer preferences towards more energy-efficient homes. 

It says this could be done in two ways. 

“Firstly, apply the adjustments as a reduction on more energy-efficient properties and those properties that have been made as energy efficient as practically possible. Secondly, offer rebates to home buyers if energy efficiency improvements are made to less efficient properties within a certain time period from the point of purchase.”

This post has originally been featured in Letting Agent Today.