Improving energy efficiency across a let property portfolio

The announcement by the Government that it has scrapped proposals for a minimum EPC rating of C for rental properties in England and Wales has offered a respite for many rural estates given hitting this target can be difficult and expensive.

However, the proposal to raise minimum ratings in 2025 remains on the table in Scotland.

Many landlords are also still keen to continue making improvements for the benefit of their tenants, who may be worried about high energy bills, and because it feels like the right thing to do.

Strutt & Parker’s Tom O’Leary who helps manage rural estates in the north west of England deals with a residential portfolio of around 200 homes, most of them in rural villages and on surrounding farms.

“There are different types of construction, although lots are sandstone, a significant proportion of them are listed and the majority are in Conservation Areas, with some on the gas grid and others not. This makes it particularly challenging in terms of raising energy standards.’

Options for improving energy efficiency are reviewed when properties become vacant or require refurbishment.

Historically, these have been based on recommendations from draft EPCs produced by a reputable assessor to guide their decision-making on refurbishments.

However, the team is increasingly forming a view of what is best for the long-term future of the property supported by input from an in-house building surveyor.

Installing LED lightbulbs, secondary glazing, extra loft insulation and draughtproofing tend to be the easiest wins, although such measures are not enough to significantly improve an EPC score.

An ongoing frustration has been shortcomings in the current EPC methodology which mean the assessment does not recognise the value of some energy performance improvements.

EPC methodology

‘In one recently refurbished property, we installed significant amounts of insulation, over and above the recommendations of the draft EPC, a log burner and an electric heating system but the EPC assessment failed to reflect that electricity is now seen as a more environmentally friendly option and the property did not receive a C grade,’ explains Tom.

‘We are therefore making decisions based on what we feel is best for the property and its occupiers, rather than targeting the previously proposed EPC grades.’

The Government has indicated that it is looking at updating the methodology used to calculate EPC ratings.

The Climate Change Committee (CCC) has repeatedly pointed out the metrics currently used are not well suited to this task. In their current form they can incentivise poor outcomes because they relate to the cost of the energy, rather than the actual energy efficiency of the building.

In 2022, there was an update to reflect the lower carbon emissions associated with the production of electricity. However, it is widely agreed that further reforms to the EPC metrics are still required to produce more sensible outcomes.

In the meantime, Tom suggests estates need to look at their properties on a case-by-case basis and make decisions holistically, considering the energy efficiency of the property, the occupier’s energy bills, and how to manage moisture and air circulation.

‘For example, we are trying to balance keeping people warm and reducing energy bills, with keeping air moving. We’ve started installing positive input ventilation which moves dry air into the house and makes a big difference in terms of property management. This is especially important if occupiers are facing difficult decisions around heating their homes in the winter.’

The key to running a successful residential property portfolio is an organised and planned approach, a sensible attitude to ongoing investment and attention to detail around compliance. If you would like to discuss this further contact Tom O’Leary.

This article first appeared in the latest issue of Land Business magazine. Download the Autumn/Winter 2023 edition of Land Business magazine.