Landlords are increasingly looking to lenders for support as they prepare for potentially costly energy efficiency upgrades, with new research putting the average bill at £11,713 per property to reach the proposed EPC C standard.
The findings, from Pegasus Insight's latest Landlord Trends research, point to a substantial green finance requirement building across the private rented sector. With 60% of landlords owning at least one property currently rated below EPC C, the scale of the investment challenge is considerable.
Despite the costs, the appetite for action is growing. Some 62% of those affected say they intend to carry out the necessary improvements, up 13% on the previous quarter. How those upgrades will be funded, though, remains an open question.
More than two-thirds of landlords expect to use savings to cover at least part of the cost, while around one in four hope to access government grants or support schemes. Others are considering additional borrowing, further advances or equity release from existing properties.
The challenge is compounded by a clear affordability ceiling. Landlords told researchers that energy efficiency improvements become financially unviable at around £9,000 per property, yet they estimate the cost of reaching EPC C will average close to £12,000. That gap of roughly £3,000 per property, multiplied across a portfolio, represents a significant barrier for many.
"For many landlords, the question is no longer whether properties need to become more energy efficient, but how those improvements will be funded," said Mark Long, founder and managing director of Pegasus Insight (pictured).
"Most landlords are willing to invest, but the costs involved are substantial. Our research found that landlords believe energy efficiency improvements become financially unviable at around £9,000 per property, yet they estimate the cost of achieving EPC C will average almost £12,000. That leaves a significant funding gap.
"Many landlords are actively looking for financial support to bridge that gap, creating a significant opportunity for lenders to help unlock investment across the PRS. The most successful solutions are likely to be those that make retrofit funding simple, accessible and commercially viable for landlords."
The pressure is not coming from regulation alone. Separate Tenant Trends research from Pegasus Insight found that 44% of renters consider EPC ratings an important factor when choosing a property, adding a commercial dimension to the compliance case.
When asked what would make improvements more achievable, landlords pointed to a range of options: further advances, dedicated green finance products, preferential rates for energy-efficient properties, and simpler access to retrofit funding.
The research suggests that whether landlords proceed with upgrades, increase rents to recover costs, or exit the sector altogether may ultimately hinge on the finance solutions available to them.
