The UK government has launched a 12-week consultation (7 February – 2 May 2025) on radical changes to the way energy efficiency is assessed in the private rented sector. If implemented, landlords will need to meet new energy performance standards before they can legally let their properties.
The proposals include:
- A new EPC assessment method starting in 2026.
- Stricter minimum energy efficiency standards, requiring all rental properties to achieve the equivalent of EPC C.
- A £15,000 cost cap per property for required improvements.
- Tougher enforcement measures, including fines of up to £30,000 per breach.
- New EPC rules for HMOs (houses in multiple occupation), meaning landlords renting out single rooms may also need a whole-property EPC.
These changes could significantly impact landlords, particularly those with older properties that require substantial investment to meet the new standards. The consultation will allow landlords to provide feedback before the final policy is announced.
What’s Changing?
Currently, landlords must ensure their properties have a minimum EPC rating of E before they can let them. The new proposals aim to raise this standard to EPC C equivalent—but using a completely new assessment method rather than the current energy cost-based metric.
New EPC Metrics (Coming in 2026)
The current EPC rating system primarily considers the estimated cost of heating, lighting, and hot water in a property. This means that electric heating often scores poorly due to high electricity costs, even if the property is energy-efficient.
Instead, from 2026, EPC assessments will be based on three new metrics:
1. Fabric Performance Metric
- Assesses the insulation quality, draught-proofing, and ability of the property to retain heat.
- Prioritises upgrades such as loft insulation, double glazing, and cavity wall insulation before other measures.
2. Heating System Efficiency Metric
- Focuses on heating performance and carbon emissions rather than cost.
- Encourages low-carbon solutions, such as heat pumps, hybrid heating systems, and high-efficiency boilers.
3. Smart Readiness Metric
- Measures a property’s ability to optimise energy use with smart meters, battery storage, and flexible tariffs.
- Encourages landlords to adopt smart technology that helps tenants reduce energy bills.
Unlike the current single A-G rating, the new system will evaluate properties across multiple categories, giving a more detailed picture of a building’s efficiency.
Key Deadlines for Landlords
Second half of 2026:
- New EPC metrics introduced.
- New EPC assessments required for landlords before making property upgrades.
2028:
- All new tenancies must comply with the new energy efficiency standard.
- Landlords can only let a property if it meets the new EPC C equivalent standard (unless exempt).
2030:
- All rental properties—including existing tenancies—must comply.
- Landlords will be banned from letting non-compliant properties after this deadline.
This means landlords with long-term tenants must still meet the new standard by 2030, even if they do not sign new tenancy agreements.
Costs & Landlord Exemptions
Cost Cap on Improvements
The government is proposing a £15,000 cap per property on required energy efficiency improvements. Some landlords may qualify for a lower cap of £10,000 under an affordability exemption.
Important:
- Costs incurred before 2026 do not count toward the cap.
- Average estimated upgrade cost: £6,100 – £6,800 per property.
- In reality, costs could be much higher, especially for older buildings.
Exemptions for Landlords
Landlords may be eligible for an exemption if:
- They reach the £15,000 cost cap but still cannot meet the required EPC standard. (10-year exemption)
- They purchase a tenanted property and need time to comply. (6-month exemption)
- Necessary improvements require freeholder, tenant, or planning permission but consent is denied.
- Upgrades would devalue the property by 5% or more, as confirmed by an independent surveyor.
These exemptions would need to be registered properly and would likely be reviewed after 10 years.
EPC Changes & HMOs (Houses in Multiple Occupation)
- Currently, EPCs are only required for entire properties rented on a joint tenancy.
- The new rules will require a whole-property EPC even if only a single room is rented out.
- HMOs must comply with EPC C from 2028.
This could bring many more landlords into scope of energy efficiency regulations for the first time.
Stronger Enforcement & Penalties
Fines for non-compliance will increase significantly:
| Offence | Current Fine | New Proposed Fine |
| Renting a non-compliant property (under 3 months) | £2,000 | Up to £30,000 |
| Renting a non-compliant property (over 3 months) | £4,000 | Up to £30,000 |
| False or misleading exemption claims | £1,000 | Likely to increase |
| Failure to comply with improvement notices | £2,000 | Up to £30,000 |
Local Authorities Given More Power
- Councils will be expected to proactively investigate landlords who do not comply.
- Landlords may be publicly named and shamed if in breach of MEES rules.
- Tenants could be given rights to demand energy efficiency upgrades, increasing potential landlord liabilities.
Concerns & Challenges for Landlords
1. EPC Upgrade Costs & Affordability
- The £15,000 cap is a one-size-fits-all approach that does not account for different property values or rental yields.
- Alternative suggestion: Cap investment at 5% of gross rental income over the past 3 years to make it more proportional.
2. Tax Treatment of Energy Efficiency Improvements
- Currently, most upgrades are treated as capital expenditure, meaning they cannot be deducted from rental income (only offset against capital gains tax).
- Proposal: Allow landlords to deduct costs as expenses to ease financial burden.
3. Difficulty Upgrading Older Properties
- Solid-walled Victorian and heritage properties face high insulation costs and structural risks (e.g., damp issues).
- Proposal: Introduce clear exemptions for properties where upgrades are impractical.
4. Lack of Government Grants for Landlords
- Most landlords do not qualify for existing energy efficiency grants.
- Proposal: Extend financial support to landlords who need to comply with new regulations.
What Should Landlords Do Now?
Short-Term Strategy (Before 2026)
✔ If your property is close to EPC C, consider making improvements under the current system before new metrics make compliance harder.
✔ If you’ve made upgrades since your last EPC, get a reassessment—you may already qualify for EPC C.
✔ For properties with electric heating, wait until 2026 to ensure upgrades count toward the cost cap.
Long-Term Strategy (Post-2026)
✔ Monitor PAS 2035 energy assessments, which provide a whole-house efficiency evaluation.
✔ Watch for the Warm Homes: Local Grant (April 2025)—some landlords may qualify for financial support.
✔ Prepare for 2028/2030 deadlines to avoid high fines and loss of rental income.
Final Thoughts
These EPC changes could have a massive impact on landlords, particularly those with older properties. While energy efficiency improvements benefit tenants, the financial and regulatory burden on landlords is significant.
We feel the government needs to:
- Provide clearer exemptions for difficult-to-upgrade properties.
- Ensure costs are tax-deductible as expenses, not just capital costs.
- Introduce realistic financial support for landlords, not just tenants.
For now, landlords should respond to the consultation (by 2 May 2025) and plan ahead to ensure they remain compliant and profitable in the years to come.
Related Articles
- Should I Let My Tenant Decorate?
- The Importance Of Building A Good Relationship With Your Tenants
- What Landlords Should Know About ‘White Goods’
- Starting your Property Portfolio
- Landlord’s Guide to Letting Property
