Changes to energy efficiency plans for let property announced
The Government has revised its timetable for improving the energy efficiency of residential let property and confirmed a lower improvement cost cap than originally proposed.
The Department for Energy Security and Net Zero has confirmed that landlords will still be expected to ensure their property achieves a minimum EPC equivalent to Band C by 1 October 2030. However, earlier proposals requiring this standard for new tenancies from 2028 have been dropped. Instead, the deadline for new and existing tenancies will be aligned so all landlords must comply by 1 October 2030.
Changes to the EPC assessment process
A significant and often overlooked change is that how EPCs are calculated is being fundamentally altered.
Currently, EPC ratings are based largely on estimated running costs. This can produce counter-intuitive results — for example, installing a heat pump may improve carbon performance, but reduce the EPC score because of electricity pricing.
The Government intends to replace this approach with a new methodology known as the Home Energy Model (HEM). Under this system, EPCs will be based on four headline metrics:
- Fabric performance
- Heating system performance
- Smart readiness
- Energy cost
New EPC certificates using this methodology are expected to begin appearing from around 2026 onwards as the system is phased in.
Landlord choice under the new metrics
Under the proposed reformed MEES regime linked to these new EPC metrics, landlords will not be required to follow a single prescribed list of improvements.
Instead, to meet the 2030 standard, landlords will be required to achieve a satisfactory fabric performance metric, and either the heating system metric or the smart readiness metric.
This is important as it means landlords will be able to choose the most appropriate and cost-effective compliance pathway for their property, rather than simply following all EPC recommendations.
For example, a landlord may choose to focus on improving insulation and installing a heat pump (the heating system route), or improve insulation and install solar PV, battery storage and smart controls (the smart readiness route).
Both could satisfy the future requirement.
This flexibility does not exist under the current EPC regime and only becomes relevant once the new metrics are used for MEES compliance.
When does this choice become relevant?
Although new-style EPCs may start to appear from 2026, the choice between compliance pathways will not be legally relevant until the MEES deadline of 1 October 2030.
Until then:
- Existing EPCs remain valid
- Current EPC methodology still applies
- Landlords are not yet required to choose between the new metrics.
In practice, the new EPC format will start informing decision-making well before 2030, but the compliance obligation linked to these choices only bites at the 2030 MEES deadline.
The £10,000 spending cap
The Government has confirmed the improvement spending cap will be £10,000 per property, reduced from the previously suggested £15,000 due to affordability concerns.
Importantly, any spending on relevant measures from 1 October 2025 onwards will count towards this cap. Landlords should keep detailed records of expenditure to evidence this. The cap will be maintained at this level until at least October 2030
This means landlords can begin improvements now with increased confidence that this expenditure will count toward future compliance or exemption thresholds.
Exemptions and the new ‘negative impacts’ test
Existing exemptions will remain but be simplified. Notably, the current ‘devaluation’ and ‘wall insulation’ exemptions will be combined into a single ‘negative impacts’ exemption.
This will apply where there is evidence that implementing a specific measure would have an adverse effect on the property, which is particularly relevant for heritage, traditional or solid-wall buildings.
Potential portfolio approach
The Government has also indicated it will explore allowing landlords with multiple properties to take a portfolio approach to the cost cap.
This could mean that, rather than applying £10,000 to each property individually, landlords may be able to aggregate their total cap across several properties to achieve compliance more flexibly.
Key takeaways for landlords
- EPCs are moving away from a cost-based score to a multi-metric performance assessment.
- From 2030, landlords will be able to choose how they comply – by a heating system route or smart readiness route, alongside fabric improvements.
- This choice is a feature of the new EPC/MEES regime and is not yet active.
- The compliance date for all rented properties is 1 October 2030.
- Spending on improvements from October 2025 will count toward the £10,000 cap.
- Exemptions will focus on demonstrable negative impacts, which is highly relevant for older and listed buildings.
- Early, well-planned improvements now can be aligned with the most suitable future compliance pathway.
If you would like to talk about MEES regulations and how they impact your business, please contact Alexander Macfarlane.
