February 15, 2023


The UK government is set to enforce new regulations regarding Energy Performance Certificates (EPC) in 2025, which will place greater responsibility on landlords to ensure the energy efficiency of their rental properties. These regulations, which require a minimum energy standard of C rating, have raised concerns among landlords regarding the impact on their existing portfolios, particularly older character buildings which could be expensive to upgrade.

While improving energy efficiency standards is something we firmly support, it is important to be aware of the impact of rising costs, potentially falling values of some properties and ultimately a decline in rental yields. This in turn could have the effect of increasing rental prices or increasing the number of unused buildings – neither of which are desirable from a social perspective.

Older properties, such as Victorian villas, have always been popular among buy-to-let landlords due to their room for development and potential for a higher return on investment. However, the new energy efficiency regulations may make older properties less attractive to landlords seeking a good return. With buy-to-let rates reaching record highs in Q4 2022, accessing long-term debt to fund development works is unattractive, if possible at all.

To address this challenge, there is a role for bridge finance. In times of broader market stress, bridge finance is a natural port of call when fast and flexible solutions are needed. Bridging rates have remained relatively stable even as the buy-to-let market saw high volatility. And, anticipating a rush for labour, materials and finance as we approach the 2025 cut-off date, some landlords are keen to bring their stock up to date well in advance. As many projects to achieve the all-important C rating require less than 12 months of works, a bridge to fund remediation works and then refinance (once funding markets normalise) could be attractive. 

It is crucial to balance environmental and social goals in this discussion. The decarbonisation of households is perhaps the largest unsolved component of the UK’s journey to net zero, but it is necessary to find means through which landlords can access finance for older properties as this prevents the waste of existing housing stock and conserves greenfield land. Bridging finance can play a role in enabling landlords to achieve required EPC standards, and ultimately contribute to a more sustainable future for the UK’s rental properties.