HMO landlords are ahead of the game when it comes to investing in energy efficiency improvements, according to new research from Paragon Bank.

Its poll found 66% of HMOs owned by these landlords already achieve an EPC rating of A to C, putting the sector ahead of the wider housing stock, where about half of homes currently meet this standard, based on government data. No survey respondents reported properties in the lowest F or G bands.

This progress comes as landlords prepare for changes to Minimum Energy Efficiency Standards, which will require all rental properties to reach EPC band C by 2030.

More than a quarter of landlords (28%) have already brought forward energy efficiency improvements in response to these proposals.

Steps

At the same time, many home providers are taking steps to protect tenants from rising household costs. More than four in ten say they are absorbing increased energy bills rather than passing these on through higher rents.

Taken together, Louisa Sedgwick, managing director of mortgages, says the insight points to a sector that is proactively improving the quality and efficiency of housing while maintaining a focus on affordability for tenants.

“Energy efficiency is now a core part of how HMO landlords operate. Many are already ahead of proposed standards, which reflects a long-term approach to managing their properties,” adds Sedgwick.

Regulated

Vann Vogstad, CEO of HMO management platform COHO, says HMOs are one of the most heavily regulated sections of the PRS, so these landlords tend to be the ones who have already put investment into their properties.

Research like this tends to survey landlords with buy-to-let mortgages on multiple properties, who are already treating their portfolios as long-term investments that are worth spending money on, he tells LandlordZONE. Many smaller landlords with one or two HMOs whose properties can be older and less improved, wouldn't be reflected. "So the trend is real, but the gap between the best and worst run HMOs is likely bigger than one headline number suggests.”

However, Vogstad suggests that HMO landlords might be ahead of the game because in an HMO, the energy bill often sits inside the rent. “Rent is fixed for the term but energy prices aren't, so any efficiency saving goes to the landlord's margin and any price rise comes out of it. In a single let the tenant often pays the supplier direct, so the landlord has no financial stake in how efficient the property is. I'd say that has a significant bearing on why HMO landlords are acting sooner.”

‍

‍