Boilers and Energy Ratings: What the latest Government Changes Mean for Your Home
Prime Minister Rishi Sunak recently made an announcement1 on a number of policies that affect the UK’s path to ‘Net Zero’2 by 2050. Whilst the headline news was primarily the pushback of the ban on the sale of new pure-petrol & diesel cars to 2035, there were some additional announcements that can affect our homes too.
Boilers
Recent years have seen Government policy that traditional fossil fuel boilers were to be phased out, with a requirement for a transition to heat pumps from 2026, meaning that should a gas or oil boiler be due for replacement, then an alternative would need to be sourced.
The 2026 deadline has now been pushed back to 2035 as part of the Government’s latest announcement, allowing additional time for UK homeowners to install gas or oil boilers into their homes. The Government also announced an increase in grants available to help homeowners transition to heatpumps, from £5,000 to £7,000.1
The decision has received mixed reactions, certainly those most affected by the change to a heat pump could be those in more rural areas, where it’s reported that some homeowners may face costs of up to £40,000 to replace their existing fossil fuel boilers for example.3
Generally the transition to a newer heating system can bring certain savings for the homeowner, and the change in the deadline to 2035 gives extra time for UK homeowners to future-proof and upgrade their property to a modern gas or oil boiler before they too are phased out.
Recent findings show that modern boilers are up to 92% more energy efficient, compared to between 65%-85% efficiency in older boilers, so an upgrade could possibly save you money on heating bills and help to reduce your own carbon footprint. The installation fees of a new boiler, on average, cost between £1,500 to £2,500, which is cheaper than installing low-carbon heating system alternatives.4
Energy Efficiency Ratings for Rental Property
Particularly of interest to landlords was the Government announcement on Energy Performance Certificates (EPCs) – overruling a previous decision to require landlords to have an EPC rating of A-C in order to rent out their property.
The EPC ratings are similar to what you’d expect to find on a domestic appliance for example, but in this case, apply to rental properties. The Government had set out that a property must have an A-C rating for energy efficiency by the year 2025 if renting out to a new tenant, and that landlords must have upgraded existing properties to A-C rating by 2028 for any properties with existing tenants already in place.1
This entire policy has now been scrapped under the latest Government plans, leading to mixed reactions from across the marketplace. Whilst some have accused the Government of disregarding environmental concerns, others have celebrated the stimulus this may bring to the rental market and potentially the cost of rent not being increased to cover expensive energy efficiency improvements required to meet the EPC criteria.5
The uncertainty generated by the EPC rating scheme has been one factor behind the reduction in the volume of rental properties available in the UK, as landlords struggled to make key investment decisions on their portfolio to future-proof it, and instead may have sought to sell property instead, especially as interest rates have risen extensively in recent times and the UK privately rented residential sector has lost over 400,000 homes since 2016.[5][6]
Ultimately, many landlords may have already begun their planned improvements to bring their rental properties up to the A-C energy standards to meet the criteria, and have already invested significant sums to do so and therefore this announcement comes too late, however they may reap the benefit of reduced energy costs as a result of the greater energy efficiency.
It’s unknown whether a future Government may overturn the recent EPC announcement, however for the time being it can help to make a buy-to-let purchase more appealing and to some extent reduce the uncertainty in this area.
The Financial Conduct Authority does not regulate some forms of Buy to Lets. Your home/property may be repossessed if you do not keep up repayments on your mortgage.
Sources
1. BBC (2023) Rishi Sunak: Cars, boilers and net zero - key takeaways from PM's speech. Available at: https://www.bbc.co.uk/news/uk-66871073 (Accessed 22 Sep 2023)
2. BBC (2023) What is net zero and how are the UK and other countries doing? Available at: https://www.bbc.co.uk/news/science-environment-58874518 (Accessed 22 Sep 2023)
3. The Telegraph (2023) The oil boiler ban pushed back to 2035. Available at: https://www.telegraph.co.uk/money/net-zero/how-to-sidestep-the-planned-2026-oil-boiler-ban-heat-pump/ (Accessed 22 Sep 2023)
4. BoilerGuide (2023) The Future of Boilers Explained. Available at: https://www.boilerguide.co.uk/boilers/future (Accessed 22 Sep 2023)
5. Financial Reporter (2023) Sunak Scraps EPC Ratings – Industry Reacts. Available at: https://www.financialreporter.co.uk/sunak-scraps-epc-regulations-industry-reacts.html (Accessed 22 Sep 2023)
6. CBRE (2023) Private Rented Sector Records Loss of 400,000 Rental Homes Since 2016. Available at: https://news.cbre.co.uk/uks-private-rented-sector-records-loss-of-400000-rental-homes-since-2016/ (Accessed 22 Sep 2023)
All the information in this article is correct as of the publish date 28th September 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
