Costs & Benefits of Landlords Going Green

As emissions from residential buildings account for 15% of the country's greenhouse gas emissions, decarbonising the UK's housing stock remains critical to meeting its 2050 emissions targets.

With the labour government announcing plans that landlords will have to meet an energy efficiency rating of C by 2030

The Mortgage Works (the buy-to-let division of Nationwide Building Society) has issued a "Private Rental Energy Performance Report".

Some of the key revelations include:

• 70% of properties in the social rented sector are rated A to C, compared with 45% in the private rented sector.
• A BTL property, rated A or B, attracts a significant premium of 10.9% compared to a similar property rated 'D'.
• C-rated properties attract a 3.4% premium, while there is a slight discount for E-rated properties (1.7%).
• Before minimum energy efficient standards (MEES), this premium was at 3.2%, not 10.9%.
• A or B-rated property attracts a 7% rental premium compared to a similar D-rated property (est £70 per month.)
• C-rated properties attract a 2% rental premium (est £20 per month) Most landlords are likely to recoup the initial investment within five years (if they sell up).

Regional Price Variations

The Mortgage Works (TMW) research indicates that buy-to-let (BTL) properties with energy efficiency ratings of A or B command a significant price premium of 10.9% compared to similar properties rated D.

The price premium varies considerably across different regions of the country. In the North of England, an A or B rated BTL property attracts a premium of 15%, however, in the South of England, the premium is notably lower at 5.6%.

Tax Landlords to Incentivise

The Mortgage Works (TMW), the UK’s largest buy-to-let mortgage lender, has proposed that the government should regulate and tax landlords as an incentive to upgrade their properties to achieve the highest possible energy efficiency ratings. This recommendation comes after TMW's research revealed that the positive impact on property prices and rents is unlikely to be significant enough to encourage landlords to make these energy performance upgrades voluntarily.