The increasing demand for energy-efficient rental properties
From more comfortable living to lower energy bills, we take a look at why tenants are seeking out properties with higher EPC ratings and what to consider when investing
There are many factors to consider when choosing a rental property and energy efficiency is likely to move up investors’ priority lists over the coming years. New EPC regulations for landlords are proposed to come into force by 2030, meaning all rental properties across England & Wales must reach an EPC rating of C or above, up from the current minimum of EPC E. The government has proposed a cost cap of £15,000, meaning landlords will not be required to spend more than this amount to bring their property up to the new energy efficiency standard.
Potential benefits are clear for both the environment and tenants. As Flora Harley, Knight Frank’s Head of ESG Research, shares in more detail here, improving energy efficiency in this way could reduce UK emissions by 1% - or the emissions for the residential real estate sector by 5%. The government estimates that its plans could save private renters £240 per year on average on their energy bills.
An opportunity for investment
Beyond the details of government policy, the move reflects the growing demand among tenants for properties that offer lower bills and a more comfortable home environment, with those in the market for a property often willing to pay a premium for a higher EPC rating. As Natasha Efstathiou, Manager for Knight Frank’s Belgravia Lettings, describes, there could be opportunity for landlords to capitalise on this demand.
“With energy costs continuing to climb, tenants are increasingly prioritising homes that are cheaper to run, making energy-efficient properties an attractive choice. As a result, properties with an EPC rating of C or above are highly sought after, with the potential to command higher rental incomes, as well as longer-term tenant retention.”
For current landlords and those looking to invest in the rental sector, navigating these upcoming changes makes seeking out expert advice all the more important. Knight Frank’s Lettings team work closely with their clients to optimise their property portfolio in a changing landscape.
Here we take a look at energy-efficient rentals currently on the market, and our agents share the advantages and untapped potential of paying attention to your EPC rating.
2 bedroom flat on John Islip Street, Westminster, London, SW1P
This apartment offers access to a superb range of amenities, while also benefiting from the energy efficiency that comes with being in a modern building. “In this area, a property with an EPC rating of E or F may command a rent of £900 per week, whereas a similar property with an EPC C rating or above could fetch £1,050 per week,” says Efstathiou.
“This uplift highlights not only a property's improved energy efficiency, but also provides tenants with greater confidence in managing their energy expenses. As a landlord, investing in energy efficiency enhances property value whilst making your property stand out in a competitive market.”
2 bedroom flat on Hallam Street, Marylebone, London, W1W
This stylish apartment in a period building offers contemporary living with character, with an abundance of natural light, a high-quality finish and an EPC C rating.
“A similar property in the area, but with an EPC rating of E or F, would likely command up to 10% less in rent,” advises Luke Hewens, Head of Lettings for Knight Frank’s Marylebone office. “Clients are becoming more and more discerning about the impact of their rental property on both the environment and, as energy prices continue to rise, their pockets.”
2 bedroom flat in Hermitage Court, Knighten Street, London, E1W
This 2-bedroom apartment in a sought-after portered development in East London offers modern - and energy efficient - urban living within easy reach of the City and Canary Wharf.
“We’ve started to recommend improvements to EPC ratings as it helps to attract reliable and quality tenants and offers more affordable bills,” says Axel Castillo, Associate in Knight Frank’s Wapping office. “People are willing to pay above the asking price for a property to prioritise their comfort.”
3 bedroom house on Cadogan Lane, Knightsbridge, London, SW1X
Arya Salari, Knight Frank’s Head of Knightsbridge Lettings, notes that prospective tenants will seek out properties such as this example from Cadogan Estates, a company renowned for its immaculate, high-end finish and attention to detail.
“Tenants will pay attention to EPC ratings from a cost perspective - the higher the rating, the lower their bills will be,” he adds. “If people have had a previous bad experience in a drafty building with poor insulation, it makes properties such as these even more attractive.”
