Paragon Bank – Mortgage Strategy

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Landlords in the private rented sector (PRS) have driven a 165% increase in the number of homes with an energy performance certificate (EPC) rating of A to C in the past decade, Paragon Bank analysis reveals.

Paragon says this comes as part of a wider improvement of standards across the sector.

Government data reveals 1.925m rental properties in England have an EPC rating of A-C, an increase of 1.2m compared with 2011.

The new report, Raising the standards of privately rented property, finds that 44.5% of PRS properties are rated A to C, compared with 42.9% in the owner-occupied sector.

Landlords have been investing in homes that benefit from increased energy efficiency in anticipation of proposed government legislation on minimum A to C requirements.

This is alongside the cheaper running costs typically associated with more energy-efficient homes.

Paragon reported a 44% increase in lending against A to C-rated rental property in its last financial year to £832.2m.

Under the government’s proposals, properties let under new tenancy agreements must be rated EPC A to C from 2025 and all tenancies from 2028.

However, it is over two years since the proposals were put forward and the industry awaits an update from the newly-formed Department for Energy Security and Net Zero.

Paragon highlights that if all properties were to be upgraded by the proposed date of 1 April 2025, approximately 3,130 homes would need to be upgraded to EPC C per day.

That rises to 4,500 if only working days are included.

The bank says the improvement in the energy rating of PRS homes is mirrored by a broader increase in standards across the sector.

In 2008, 44% of homes in the sector were defined as non-decent according to the Government’s English Housing Survey. The figure now stands at 23%.

The addition of good-quality homes has diluted the presence of poorer stock. In 2008, 1.8m privately rented homes were classed as decent, rising to 3.3m in 2021, representing an increase of 83%.

There has also been a reduction in the number of properties classed as non-decent, falling from 1.4m to 990,000, a 29% reduction.

Paragon Bank managing director of mortgages Richard Rowntree comments: “The PRS is too often associated with poor quality housing and that is simply incorrect. Landlords have driven an improvement in standards in recent years, which is reflected in the increase in energy-efficient rental property.”

“However, landlords and the broader industry that serves the private rented sector now need more clarity on the government’s proposals for minimum levels of EPCs.”

“It is over two years since the government’s consultation closed and the vacuum of information or direction since has created uncertainty and confusion.”

“We believe the timescales as they are currently proposed are unworkable as the infrastructure to support the upgrading of over 2m properties in such a short window does not exist.”

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