Every since I started to market one of my commercial buildings around 10 years ago now, I began to doubt the efficacy of the EPC rating system.

The guy that came along to do the inspection told me himself he had just completed a 6 week course, or whatever it was, to train to be a building inspector. He explained to me how the computer system would calculate the dreaded EPC rating once he went away and entered all his data.

I say dreaded because I knew the building would probably produce a low rating, solid walls, 3 combination boilers that I had installed 15 years ago and no double glazing, though there was roof / ceiling insulation.

Low rating

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Sure enough the rating was low, I can’t remember now what it was but probably a D or even an E. But it was the EPC system’s recommendations that shook me. It was suggest I fit solar panels on the roof! Not a mention of uprating the boilers to condensing ones, or insulating the walls, let along fitting double glazing? When I questioned him, he said, that’s what the computer says. It was truly bizarre!

I’m not condemning every EPC inspection. When they are carried out by a competent assessor, and I’ve had some done since by chartered surveyors that gave me much more confidence, but the fact remains that the algorithm built in to the EPC calculation produces misleading results.

A flawed system

The Government is looking to have as many homes and commercial buildings as possible to be EPC rated at band C or above by 2035. But what experts are telling us is that as property owners go green they are being punished by a ‘Flawed’ energy performance certificate system. It means that upgrades can actually lower a property’s rating.

In the worst case scenario, property owners and householders risk spending tens of thousands on energy efficiency upgrades that can actually make their properties less valuable, thanks to the Government’s “flawed” Energy Performance Certificate (EPC) system.

When owners come to sell in 10 or 15 years’ time they could find themselves trapped as banks would mark down values. Cheaper mortgages would be difficult to access, despite having spent money making their properties more energy efficient.

Inconsistencies in the EPC rating system

Inconsistencies in the existing EPC calculation mean that property owners currently can pay out thousands of pounds for work that, when they come to sell, they find actually lowered their EPC rating.

The energy sector has been scathing about the system. The EPC rates buildings from A to G but experts are saying the current system is “not fit for purpose” because the rating is based on the cost of energy used, not on the actual carbon emitted into the atmosphere. It results in a system that punishes people for installing heat pumps because they use more electricity and LPG gas because it’s more expensive than natural gas – it incentivises the use of mains gas over electricity or LPG.

Tom Spurrier, of the UK Green Building Council, a leading industry body, has said:

“We have currently got a metric that incentivises gas because it is cheaper.” If you install a heat pump, which is powered by electricity, your EPC rating may actually fall. Properties with Liquid Petroleum Gas (LPG) are also marked down because the gas is more expensive than mains gas.

Landlords affected first

If the Government wants all private homes to be EPC band C by 2035, private landlords are going to be affected first because of plans to introduce a band C requirement for new lets by 2025, and for existing lets by 2028.

Owner occupiers will also be hit and landlords will be required to have an average band C ranking for their portfolios by 2030, leading to homeowners in the worse-performing properties paying higher mortgage costs. There is a risk that private homes that cannot meet the target could become un-mortgageable.

Commercial landlords

In the case of commercial buildings, a Government consultation envisages a phased implementation with an interim milestone of an EPC rating of C by 2027, leading on to an EPC rating of B by 2030. The thinking behind having an interim milestone is to encourage landlords to take action before 2029-30, while providing some flexibility to allow landlords to plan and implement improvements into their tenancy cycles.

Each milestone would follow two year ‘compliance windows’: 1 April 2025 – 31 March 2027 for an EPC rating of C and 1 April 2028 – 31 March 2030 for an EPC rating of B. At the beginning of each window, landlords will have to present a valid EPC.

By the end of each window, landlords would have to show that they have achieved the relevant threshold or have registered an exemption. Any exemptions would need to be refreshed at the start of each compliance window. The intention is that, even where an exemption is registered, landlords should demonstrate that the building has achieved the highest EPC rating that is possible to deliver cost-effectively.

It is made it clear that landlords can bypass the two stages and go straight to B if it is more cost-effective and minimises disruption for tenants when doing refurbishments and improvements.

Room for improvement

There are some rather bizarre outcomes to the present EPC system that need to be tackled if the above targets are to hold any credence with property owners and energy specialists.

David Simms, a small-scale developer and landlord in London told The Daily Telegraph that when he redeveloped a block of flats in Clapham, he paid out £10,000 to install energy-efficiency improvements, including insulating the building.

“The EPC rating went from a B to a borderline D because we put in electrical heating. It was like being kicked in the face,” he said.

The solution, according to the EPC assessor, was to revert the heating system back to overnight storage heaters. This was despite the fact that this would increase the total energy usage.

On another redevelopment cited by Mr Simms, he installed double glazing, energy-efficient lighting and an electric boiler. Again, the EPC rating fell from D to E and he says, “The assessor told me if it had been a gas heating system it would have gone to a B.”

These sorts of anomalies in the EPC rating system go directly against the Government’s aim of reducing, then eventually banning, the use of natural gas boilers and encouraging heat pumps, for which they are offering £5,000 grants.

Jess Ralston, of the Energy and Climate Intelligence Unit, a non-profit organisation, told The daily Telegraph:

“EPCs are so focused on cost, they forget the environmental impact. If you install a heat pump, you will be punished.”

When the EPC system was designed back in 2007, said Mr Ralston, electric generation was very different to now. Ten years ago, electricity use produced more than twice as much carbon as natural gas, but now it is half that of gas.

Mr Spurrier says that:

“In terms of overall net zero, we need to switch as much as we can to electricity, But because the EPC system has not changed, it incentivises property owners to do the opposite. Pressing ahead with EPC targets without reform will be extremely problematic. We don’t want to embark on a policy using a tool that is not fit for purpose.”

David Adams, of the Energy Efficiency Infrastructure Group, an industry body, says:

“The EPC system is completely inadequate to tell you how good a dwelling is and how much improvement it needs. People now may have completed on a house and be completely unaware of the liabilities they are taking on.”

11 COMMENTS

  1. The Govt seems intent on forging ahead with EPC C despite all the evidence that is is a flawed measured. This means it is virtually impossible for a LL to future proof their portfolio with any degree of certainty. Because of this I have reluctantly decided to sell up and I don’t think I will be alone.

    With demand for rental property at an all time high I believe EPC C will precipitate a housing crisis as LLs like me leave the PRS. EPC C is very bad news for LLs and tenants alike and yet it will achieve next to nothing in terms of reducing greenhouse gases.

    • Totally agree. I’m selling / have sold 4 of my properties for this very reason. – That will be 4 families told to leave & 4 less properties available in the PRS.

  2. I completely agree with Tricia. It is also far too expensive to upgrade from a D to a C. Even if I had the money available to upgrade I wouldn’t be able to recoup the outlay without putting rents up considerably which would make my properties unaffordable to tenants. I’m being forced to evict my tenants and sell.

  3. I agree with the comments above. When is the Government going to wake up to the crisis they are blindly walking into. I am going to have to evict some long term tenants who thought they had their forever home in one of my houses. One has cavity wall, loft insulation, under floor insulation but heated by electricity. Need to convert to gas to get a C!!! Its already green but not reflected in EPCs which don’t measure green, just cost. I am beginning to think the Government are just stupid, they are certainly blind and deaf to the information being presented to them.

  4. I’m amazed that this information is not mentioned any where- i heard it 2 days ago from an energy assessor.
    He said the current system is based on the 2012 model for assessment -mainly based on cost of supply not allowing for the amount of sustainable sources. there is a new standard for assessment, it was due to be implemented in 2019 then covid and still not being used but as not in law but due in by june 2022. this will take into account electric heaters efficiency and heatsource pumps and change ratings significantly. i have yet to verify this but it changes everything!!

  5. EPCs are ridiculous. And I bet once Landlords have either sold or got properties to a “C”, they’ll then change the EPC algorithms & many will then fail to meet the new EPC grades required.

  6. When our rented house had an EPC rating of D last year we could not believe it. We were convinced it would be a C. This year we looked back at the 2010 EPC and found our house had grown in size!!! In 2010 it was 52 sq mts and in 2020 it had GROWN to 67 sq mtrs. We have had no extensions whatsoever!! We tackled the EPC company Elmhurst Energy Systems Ltd and the assessor. Elmhurst washed their hands of it all and the assessor was very loudly adamant that he was correct, and did not even know about the impending legislation to increase the rating to C!!!!!!
    Your comments would be gratefully received please.

    • Hi Beryl
      I used to be an Energy Assessor (about 10 years ago). Yes the rating system is flawed in several ways and quite crude hence inconsistenies are rife. You have the right to request the site notes from the Energy Assessor which should include dimensioned floor plans of the internal dimensions to the centre of internal walls of each floor. This is used to arrive at the gross internal floor area of the property so you can then check for yourselves and if is incorrect, the Energy Assessor must amend the EPC at their cost and relodge the new EPC accordingly. The contact details of the Energy Assessor will be on the EPC and in the first instance you must go throught the Energy Assessors complaints process before Elmhurst will consider taking it further. Energy Assessors can lose their registration and the ability to produce EPC in some circumstances (incompetance?) and they must have professional indemnity insurance. One point to note – the gross internal area does not include unheated areas – often conservatories and garages/outbuildings. For a conservatory to be included it used be be that there is no external grade door between it and the house even if the consrvatory is heated by the cental heating. However the protocals will have changed so worth asking the Energy Assessor if this is still the case. Mistakes are made and should be corrected by the Assessor if necessary. Hope this helps.

  7. I don’t support the government’s plans for retro fitting, nor forcing people who don’t want them to install heat pumps. They are allowing themselves to be driven by climate and other terrorists – the ‘do as I say, or else’ brigade. Sure there is climate change, but forcing people to spend a fortune on equipment they don’t want is not the way to go, especially when the carbon outlay to deliver such a programme is enormous, as is the environmental impact. Emissions are far cleaner than they have ever been in this country already, and technology continues to improve all the time. Most tenants don’t give a stuff about EPCs or the environment. All they want is a nice warm house which is as cost effective as possible to heat and run.

  8. One of my tenants has been in the property 15 years now (modern property built in 1995). He’s just about retired and is very settled and cosy in his home heated by storage heaters. He has them full on, E7 at night, and he’s at home most of the day, perfect.
    This article shows that the EPC system cannot even be used as a rough guide of what a LL can do. I hope that Tom Entwistle is waving this loudly in the face of his MP (please Tom) to give them that jaw dropping moment of realisation that they’re working towards something that has no logical system to measure what’s required.
    Even still, a tenant or home owner doesn’t really want to know whether his carbon foot print is like a yeti or a mouse, but rather how much it’s going to cost them.
    So, my tenant will quite likely still be there in 2028. The property has just had it’s EPC rated on the top end of E, seems to be the best one in the street! I could change the front door (£1000+), I could put insulation inside the garage concrete roof below the lounge (three story property) (£4000+), I could double the loft insulation which is already at 150mm (£500), I could also install solar panels (£5000+)…. but, it would barely reach a C rating under the current system. Even the storage heaters could be changed for newer ones with digital temperature controls, but it will be the same technology and effect once my tenant has set it at 30c!
    Sadly, although this is one property and tenant I wish to keep, it’s likely that I’ll be having to ask this tenant, by that time in his late 60’s, to move on and so that I can renovate and sell.
    What a mess this is becoming…

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