EPC Compliance Shift: Impact on the UK New-Build Market

The UK property sector is facing a significant EPC compliance shift as the government’s revised energy performance targets take centre stage. With an updated deadline for rental properties to meet minimum efficiency standards, landlords and investors must now rethink their strategies. This change is expected to impact the new-build housing market significantly. New-builds already boast superior energy efficiency compared to older properties.

As investors seek ways to comply with evolving regulations while maximising returns, newly built homes could become an increasingly attractive option. But what do these changes mean for landlords, tenants, and the wider property market?

Revised EPC Standards: What Landlords Need to Know

Under the government’s latest ‘Plan for Change‘, rental properties in England’s private rented sector (PRS) must achieve an Energy Performance Certificate (EPC) rating of C or higher by 2030. This deadline, which replaces the previously proposed 2028 target, offers landlords additional time to bring their properties up to standard.

Many landlords have already begun upgrading their properties. However, those with older or less energy-efficient homes may face steep costs. These costs would help meet the new requirements. Under potential new rules, landlords may need to spend up to £15,000 on efficiency improvements. This is an increase from previous spending caps. Landlords must make these improvements before applying for an exemption.

This financial burden is causing concern across the sector. Without clear government support in the form of grants or tax incentives, some landlords may struggle to afford the necessary upgrades. Others may choose to sell their properties instead of investing in costly refurbishments. This would reduce the number of available rental homes. As a result, the already constrained market would tighten further.

Why New-Build Homes Are Gaining Investor Attention: EPC Compliance Shift

With energy efficiency becoming a critical factor in property investment decisions, new-build homes are emerging as a highly attractive option. These properties typically meet or exceed the new EPC standards from the outset, eliminating the need for costly retrofitting.

According to Flora Harley, head of ESG research at Knight Frank, the new homes sector is likely to benefit significantly from these regulatory changes. Newly constructed homes offer higher building standards and better energy efficiency. This makes them a future-proof investment. Landlords can remain compliant without additional expenses.

Investors choosing new-builds over older properties can benefit in several key ways:

• No need for costly energy upgrades – The vast majority of newly built properties already achieve an A or B EPC rating, ensuring compliance with upcoming regulations.
• Lower running costs for tenants – Energy-efficient homes are more affordable to heat and maintain, making them highly desirable in the rental market.
• Fewer void periods – Unlike landlords upgrading older properties, new-build investors won’t have to deal with vacancies while carrying out extensive refurbishments.

Energy Efficiency: New-Builds vs. Older Homes

Research by the Home Builders Federation (HBF) highlights the stark contrast between new-build and older properties when it comes to energy efficiency. Newly constructed homes emit an average of 1.22 tonnes of carbon per year. In contrast, existing homes emit 3.51 tonnes. This represents a 65% reduction in emissions.

For landlords, the benefits extend beyond regulatory compliance. Investing in energy-efficient properties can increase a home’s appeal to tenants, particularly as energy bills remain a growing concern. On average, residents of new-build homes pay around 50% less for heating, hot water, and lighting compared to those in older properties.

The HBF report revealed that new-build flats and maisonettes are the most affordable property type for energy costs. Their average annual energy bills are £644.75. In contrast, residents of older flats face average bills of £1,040.16 per year. Overall, occupants of new-build properties pay approximately £755.09 per year for energy, while those in older homes spend over £1,535.09 annually.

Will Landlords Move Away from Older Housing Stock?

As the EPC deadline approaches, landlords with older properties must weigh up their options. Some may invest in upgrades to bring their homes in line with regulations. Others may decide to sell. They could reinvest in more energy-efficient properties.

Gary Hall, head of lettings at Knight Frank, acknowledges that not all landlords will find it financially viable to make significant improvements. Without adequate government support, some may struggle to justify the investment. This is especially true for properties needing substantial renovations to achieve a C rating or higher.

To encourage more landlords to make improvements, industry experts have called for grants, tax incentives, and clear financial caps on upgrade costs. Without such measures, some landlords may exit the market. This would happen instead of absorbing the costs. As a result, rental supply would tighten further.

The Long-Term Outlook for New-Build Investment

As the UK property market continues to evolve, new-build homes are well-positioned to become the preferred choice for investors. The combination of built-in energy efficiency, reduced running costs, and regulatory compliance makes them a compelling option in a changing landscape.

For those looking to invest in off-plan developments, it’s advisable to confirm the expected EPC rating with developers before purchase. Given the growing emphasis on sustainability, properties that exceed the minimum energy efficiency requirements could offer even greater long-term value.

Final Thoughts: EPC Compliance Shift

The UK’s new EPC targets are set to reshape the property investment landscape, placing increased pressure on landlords to improve energy efficiency. The extended deadline provides some breathing room. However, many investors may find new-build properties to be the most practical solution. These properties offer regulatory compliance, cost savings, and future-proof portfolios.

As demand for energy-efficient homes grows, new developments are likely to play a key role in meeting both investor and tenant needs. Landlords aiming to stay ahead of legislative changes should focus on new-build housing. This shift can help maximise rental yield.