An extensive government-funded study concluded that UK households contribute to around 20% of the country’s total carbon emissions. If the UK is to come even close to achieving its carbon neutrality goals, the energy efficiency of homes across the country needs to be stepped up significantly, something which could be done with the help of bridging finance.
In particular, the government has decided to set its sights on encouraging (i.e. forcing) landlords to improve the energy efficiency of their rental properties.
As things currently stand, all buy-to-let properties in the UK must have an Energy Performance Certificate (EPC) rating of E or above, before they can be let out to tenants. This requirement came into effect in 2020, resulting in many thousands of landlords having to conduct extensive and expensive upgrades to comply with the new legislation.
More recently, the government outlined a proposal that would make it a legal requirement for buy-to-let properties to have a band C energy rating by 2025, applicable to new tenancies. Three years later in 2028, landlords will have to ensure that all of their existing tenancies are likewise brought up to a band C standard or better.
Major Financial Difficulties
Both of these requirements have made troubling reading for landlords, as the vast majority of buy-to-let property owners are likely to be affected by the new rules. Research suggests that around 60% of UK homes have a D energy rating or lower, indicating that most homes will need to be upgraded to comply with the new legislation.
Worse still, an additional proposal was put forward that would increase the minimum energy-efficiency rating for buy-to-let homes in the UK to band B by 2030. Clearly overlooking (or ignoring) the concerns of landlords, just 4 of the 84 consultants involved in writing the proposal considered it unviable.
Concerned is now widespread that vast swathes of buy-to-let business owners across the UK will simply not be able to afford to make the necessary changes. Green incentives are likely to be introduced by the government along the way, but only for those who are able to invest significant sums of their own capital in their property renovation projects.
Bridging Finance Provides Welcome Breathing Room
This is where bridging finance could play an increasingly important role in helping buy-to-let investors keep their businesses afloat. An affordable short-term bridging loan could provide BTL property owners with the spending power they need to ensure they meet the government’s new guidelines, along with welcome breathing room to get their own finances in order.
Bridging finance could prove particularly useful in qualifying for green incentives, where landlords are unable to put up the capital themselves. Energy-efficiency improvements are funded with a bridging loan, the landlord qualifies for the applicable incentive and the loan is repaid several months later.
In theory, flexible bridging finance could safeguard many landlords from the prospect of having to sell their properties, if they are unable to afford to pay for the necessary renovations outright.