Cost & carbon: the potential for stricter minimum efficiency standards in the private rented sector
The government plans to reintroduce the requirement for all domestic rental properties to reach an EPC C minimum by 2030. What is the potential cost and carbon saving of the policy?
5 minutes to read
We’ve been here before. More stringent minimum energy efficiency standards (MEES) for the domestic private rented sector (PRS), currently a minimum of EPC E for England & Wales, were proposed by the previous government before the idea of raising to EPC C minimum was scrapped in 2023. Labour included a manifesto commitment to reinstate these plans and the new proposals are to bring the date forward so that all rental properties in the private rented sector (PRS) across England & Wales reach an EPC C minimum by 2030.
Improving the energy efficiency of the UK’s housing stock is a worthwhile goal, but it’s not without a hefty cost. Our latest analysis puts that figure, for the private PRS sector, at an estimated £21.6 billion. The upshot is that it could also reduce UK emissions by 1% - or the emissions for the residential real estate sector by 5%.
The numbers, as crunched by Johan Hagstrom of Knight Frank Analytics, compared the EPC certificates of more than 31,000 homes in the PRS that have improved their home energy performance in the previous five years pre-and post-improvement.
On average upgrading a private PRS property to an EPC C-rating would require 2.2 interventions – ranging from 1.6 interventions for properties previously rated EPC D-rating to around 4 interventions for those rated F or G. Utilising the data of improvements undertaken for PRS properties, and fixed costs provided by CoreLogic whose homeowner-centric one-stop retrofit service, Ecofurb, provides assessment through to installation for energy efficiency refurbishments (see later in this blog), the average cost of implementing these as of January 2025 would be £8,148.
However, this varies depending on numerous factors, not least the size, age and existing efficiency rating of a property. Properties with an EPC rating D, for example, would typically need to spend £5,841 on the necessary improvements to move to a C-rating, with this figure increasing to average £14,107 for properties moving from a band F and more than trebling to £18,174 for those previously rated G. The proposed cost cap is £15,000 although this is also being consulted on and whether to reduce this to £10,000 for those under an 'affordability exemption'. Unsurprisingly, this varies by housing type with flats averaging £5,869 versus an average £9,410 for houses.
Scaling up to the entire 5 million households in the PRS, where around 60% are rated EPC D and below, the cost adds up to an estimated £21.6 billion. Looking at average rental levels across all properties EPC D-rated and below, that cost equates to more than five years of annual rent – notwithstanding any other associated costs.
Counting carbon
According to the estimated carbon saved from EPCs, upgrading to a C-rating saves an average 2 tonnes of CO₂ per year -ranging from shy of 1 tonne for properties previously rated D to almost 10 tonnes from those rated G.
Scaling this to all PRS households would potentially yield a reduction in C02 emissions of 4.5 million tonnes – 1% of the UK total (using 2023 figures) and around 5% of the total attributed to residential property (as per estimates that they account for a fifth of UK total direct emissions).
What would this look like if extended to all households?
It is more expensive for owner-occupier households, who have required slightly more interventions with an average of 2.4 required, which would cost £9,275 to get to an EPC C-rating. This ranges from £7,044 from a previously D-rated property to £18,378 from G-rated. Scaling this up, the total potential required by owner-occupiers amounts to £90.6 billion, but it could reduce the UK CO2 emissions by 4% or 20% of residential emissions.
Policy push
Clear, consistent government policies will be pivotal in realising these savings and alleviating costs.
This policy is not new. What needs to be different this time is a firm commitment that also sets out how the government is going to deliver this. Will it be all stick, or will there be some carrots in the form of grants?
Currently, the Boiler Upgrade Scheme (BUS) offers grants, up to £7,500, to cover part of the cost of replacing fossil fuel heating systems with a heat pump or biomass boiler. Whilst the takeup of heat pumps has been lower in the UK than in other countries, 2024 saw a record number of installations due to the BUS. Indeed, redemptions on the BUS reached almost 3,000 in October 2024 and 39,738 (of which 97% were heat pumps) since May 2022. Overall, around 260,000 heat pumps are installed across the UK, according to the MCS, with around 135,000 government-supported installations, according to the latest data. While progress is being made, this is still far short of the 600,000 annual target by 2028.
The other pinch point is who will deliver the measures. Estimates from The Green Jobs Taskforce indicate the UK will need 230,000 additional trained workers by 2030 to retrofit all buildings – some of which will be residential specific.
The Government’s Green Home Finance Accelerator (GHFA) £20 million innovation programme is also bringing forward solutions to assist homeowners with their decarbonisation and energy efficiency improvements. Matthew Fleming-Duffy of Knight Frank Finance has been working with Ecofurb. “The ‘Ecofurb Plan’ includes an assessment for a property’s energy efficiency and recommendations for retrofit options. The plan is tailored to homeowners’ specific goals – which may include derisking a property’s exposure to energy-price fluctuations or simple, low carbon improvements - and budget. Ecofurb then connects homeowners with trusted installers and to Knight Frank Finance for mortgage advice to provide support throughout the process.”
There needs to be a considered and clear way forward that looks holistically at the need, the benefits, the cost and the implementation in practice to ensure decarbonisation of UK homes can be enabled and maximised.