Revision of minimum energy efficiency standard (MEES) regulations by the Government and the delay in implementation should not be seen by landlords as a reason to sit back and wait. Currently 17 per cent of UK emissions come from residential property and, as highlighted in a recently published Savills report Spotlight: The future of rural homes, it is essential for the UK to strive towards homes that are energy efficient. 

So why is it important for landlords to be proactive and what is the best approach for the long term? 

There is a strong argument for landlords to develop an energy efficiency strategy for residential property focused on the big picture of net zero rather than the next EPC (Energy Performance Certificate) target. The milestones may currently be unclear but landlords can be certain that energy efficiency will be a policy priority for all political parties. 

Developing an energy efficiency strategy for a residential portfolio will help to ensure future compliance with MEES and a clear path towards achieving net zero.

Landlords will be required to make substantial capital investments as part of working towards net zero and wherever possible will be looking to make sure the investment delivers against multiple objectives. As well as compliance and cost efficiency, elements such as heat security, environmental performance and quality of life for tenants can be built into the energy efficiency strategy to help ensure the investment is well targeted.

Here are four steps to help create a robust strategy that represents a good return on investment:

1. Assess

Use a building surveyor to appraise buildings; the approach will be more comprehensive than an EPC assessment and will establish a property’s true condition and capacity for appropriate upgrades. Where an EPC assessment may recommend cavity wall insulation, a building survey might highlight a wall’s external face is not watertight which could render insulation unsuitable and potentially damaging. 

Taking a more detailed and holistic approach means other objectives can also be met such as developing a preventative maintenance programme to plan and manage expenditure. This may add time and cost in the short term but it means there is a thorough understanding of the fabric of each building and its potential within a portfolio.

2. Analyse

Analysing the information gathered from the assessment process enables the development of different scenarios. Generating a range of three is a good idea. The first would be based on the minimum requirements so a property is compliant for letting; second would be the best achievable; and finally the recommended scenario, which adopts a balanced approach incorporating budget, asset value and the landlord’s objectives.

3. Combine

Individual property assessments are important but so too is an overview of the entire portfolio. A portfolio-wide assessment establishes an initial, estate-wide benchmark, overall recommended actions and the ultimate potential of the portfolio including potential emissions savings, EPC ratings, percentage improvement and the estimated costs to achieve the target.

4. Comply

MEES compliance must be addressed. If achieving the EPC target is not possible in the short or longer term, exemptions may be available with the case supported by the evidence gathered during the portfolio review.

Whilst the Government recently announced plans to scrap the proposed EPC targets, this topic will continue to be part of discussions driven by a need to meet net zero targets. The message is clear across all political parties; for example, the Labour Party’s Warm Homes Plan looks to upgrade the energy efficiency of homes. 

A focus on EPCs should form part of any environmental/energy efficiency strategy for a business and, following a front-loading of capital investment by property owners, savings could be sought and the future proofing of the asset achieved.  

Further information

Contact Katie Stein and Andrew McRoyall