COMMENT For all their flaws, energy performance certificates play an important role in the market as a signal of a building’s environmental credentials – not just for investors and lenders but also for landlords and tenants.
The government has recently consulted on reforms to the energy performance of buildings regime, including changes to EPCs, and while we at the BPF agree that EPCs can be improved, we want to see evolution not revolution. Any changes need to be fully consulted on and carefully implemented in order to avoid disruption to the market.
Complex and confused
The focus of the proposed EPC reforms is on domestic EPCs. We believe this is right and would not support major changes to non-domestic EPCs at this time. However, when it comes to domestic EPCs, the focus should be on creating a simpler, more accessible and more accurate EPC. We have some concerns that the proposals might do the opposite and result in a more complex and confused EPC.
The government is proposing a range of new headline metrics for domestic EPCs. In our response to the consultation paper, we suggest that a carbon-based metric could be an effective headline metric for domestic EPCs. This is the headline metric for non-domestic EPCs and we know that carbon metrics are important for investors and lenders who are looking to invest in low-carbon and zero-carbon buildings.
There is an argument that a carbon metric will become less relevant over time due to the decarbonisation of the grid. However, our experience in the commercial real estate sector is that grid decarbonisation has been a motivating factor in switching from fossil fuels to all-electric buildings, as this is then positively reflected in the non-domestic EPC rating.
We also suggest that careful consideration needs to be given to changing the validity period of EPCs. Reducing the validity period from 10 years, combined with a requirement that valid EPCs are needed throughout a tenancy period, will raise practical, logistical and cost challenges.
Ongoing engagement
It is important to consider EPC reform in the context of the wider policy environment. We need to strike the right balance between improving the energy efficiency of our homes and supporting a thriving private rented sector. Regulatory and legislative changes, such as those included in the Renters’ Rights Bill that is currently going through the House of Lords, have the potential to create further disruption for an already squeezed private rented sector.
We also need to consider EPC reform in the context of new minimum energy efficiency standards. The government is separately consulting on new MEES for the private rented sector, which will set new standards and targets using the proposed new domestic EPC.
Ministers have said in the consultation paper that they want new tenancies to meet the new standards by 2028 and all tenancies by 2030. These timescales are incredibly challenging and we do not believe that there is a sufficient lead in time for the industry to adapt to new metrics and improve properties in time for a 2028/2030 deadline.
Whatever the exact outcome of the consultation, it is clear that significant reform is on the way. We want to see ongoing engagement between the government and the sector on the new metrics and methodology and a well-thought-out transition period, including “grandfathering” rights for existing EPCs. This will be key to a smooth transition to the new regime.
Rob Wall is assistant director and sustainability lead at the British Property Federation
Image from the BPF
Share your feedback
