The Impact of the Energy Price Cap Increase
The price cap for energy has been up by 10% since October 1st, and UK homeowners and tenants are preparing for yet another dent in their pockets. Those living in less energy-efficient homes will feel the pinch particularly. New data released by Rightmove found that homes rated lowest with EPC ratings of G will see increases in their annual bills by the highest amount, at £558.
The one clear thing is that energy efficiency is not just a ‘nice-to-have’ anymore; it’s now a key factor for buyers and renters in equal measure, and an overwhelming number of the latter now consider it one of the most important aspects of a property. It’s easy to see why – the annual increase in the bill of a house rated A might even be as low as just £56.
Energy Price Cap Rise: What Does It Mean for Tenants?
An energy price cap limits how much an energy provider can charge per unit of electricity and gas. It’s supposed to be a protective mechanism on behalf of consumers from sky-high bills, but in the case of rising energy costs, the cap has been raised each year.
The rise would not be particularly high for those in energy-efficient homes, rated A to D on the EPC. As an example, an EPC D-rated home would feel an average rise of £225 per year.
Things are worse for renters in properties with poor energy ratings. Renters usually have less control over the energy efficiency of their household. Unlike homeowners who can decide to upgrade the insulation and windows or even get a new boiler, renters have to wait for landlords to upgrade their properties with such features. A large number of tenants, therefore, end up in energy-inefficient homes with bills that are far too high with nothing they can do to improve things.
The Energy Efficiency Factor
Energy efficiency has quickly become important for those who pay the bills and, increasingly, those who wish to rent or buy a home. As the cost of living rises and energy prices remain high, it’s no surprise that both tenants and buyers are prioritising properties that offer long-term savings on bills.
A survey by Rightmove found that 72% of respondents would adjust their daily routines to benefit from discounted energy bills. This could mean shifting energy use to off-peak hours when renewable energy is more available. However, tenants are at a disadvantage because they cannot modify the structural features of their homes. This limits their options for reducing costs, making energy-efficient properties more appealing than ever.
As energy prices continue to rise, tenants will shun homes with bad EPC ratings for better-managed ones that will save them money and make them feel more comfortable. This would place energy efficiency as much a financial issue as an environmental one, and neglectful landlords will soon find themselves with harder-to-let property and reduced rents.
What Can Landlords Do?
Traditionally, landlords would rarely consider energy efficiency improvements – an added cost, but in fact, even tiny upgrades to a rental property save in the long term. A home poorly insulated will surely lose tenants to better-insulated homes, leaving the landlord with homes unrented and lost rent. On the other hand, energy-efficient upgrades, such as fitting double-glazed windows, upgrading the insulation, or replacing old boilers, could make a rental property much more attractive to tenants who would otherwise turn away from high energy costs.
Many will pay a premium to live in a home where they do not need to change their ways to avoid high costs. Consequently, some landlords who are now investing in energy efficiency improvements are more likely to benefit from increased tenancies and reduced vacancies.
Why Upgrades Are Worth the Investment
According to Aydin from Cavitech, a cavity wall insulation and energy efficiency company, changes to EPC ratings will pay off in the long run.
“Sometimes, landlords aren’t willing to invest in changes and just feel that the cost of upgrades is too high upfront,” he said. “But what they usually forget to take into account is the loss of tenants due to very high energy bills, which is much costlier.”
The more energy prices rise, the more both tenants and landlords should be looking for long-term solutions. For tenants, a move into a more energy-efficient property might mean the difference between affordable and crippling bills. For landlords, spending on improving the energy efficiency of their stock now could keep thousands in rent from being lost by losing tenants and make their properties much more attractive to others who are trying to avoid the energy price pinch.