Evidence of a rural urban divide in the costs for upgrading homes to meet required future ratings is another factor impacting the private rented sector.
Landlords of private rented housing in England and Wales will have to spend more to upgrade rural housing stock to remain compliant. Analysis by Savills research has identified an average upgrade cost premium of £8,900 for rural homes compared to urban ones, with only 39% of that premium explained by poorer initial EPC ratings.
Its latest research report Future-proofing rural homes Savills estimates that bringing all non-compliant PRS houses in England and Wales up to standard could cost £27.8 billion* in the most likely scenario, rising to £37.3 billion in a worst case.
Analysis of more than three million valid Energy Performance Certificates for PRS houses in England and Wales showed that while rural non-compliant PRS homes accounted for 15.8% of the housing stock analysed they make up 22.9% of the likely total expenditure. In monetary terms this means the bill for upgrading rural homes equates to £6.4 billion* in the likely scenario, rising to £8.2 billion in the worst case.
Joe Lloyd Associate Director Savills Rural Research comments, “Rural landlords are faced with a double whammy; there is a higher proportion of rural homes in the worst EPC categories (10% are within F and G ratings compared to 2% of urban) and the upgrade costs for rural homes are consistently higher. For example, properties needing to improve from a G to C rating, the price differential is significant with average costs of £33,600 in rural areas against £16,300 in urban areas.”
A survey of rural professionals in Scotland by Savills Research, indicates that a lack of policy clarity, as well as the cost of works and low rental return relative to upgrade cost, are the main barriers to improving rural rented stock.
The disproportionate impact of the minimum energy efficiency standards (MEES) rating upgrade for rural homes will directly affect how PRS landlords manage their portfolios in future. According to a Savills survey, 78% of participating rural estate managers predicted the disposal of poorer performing homes because of changing regulation with only 12% foreseeing more investment in existing homes.
*This is according to valid EPCs that were analysed by Savills Research.