Retrofit Funding Schemes: A Guide for Buy-to-Let Landlords

Enhancing the energy efficiency of rental properties is becoming increasingly important for buy-to-let landlords. Doing so ensures compliance with regulations, potentially boosts property value and appeals to environmentally conscious tenants. Several retrofit funding schemes are available to assist landlords with implementing such improvements. This article explores these schemes, offering insights into eligibility criteria, benefits and application processes.

Why Retrofitting Rental Properties Has Become Important

Retrofitting has become increasingly important due to rising energy costs, stricter government regulations and growing tenant demand for energy-efficient homes. The government has set ambitious targets to reduce carbon emissions, including the requirement for new rental properties to have a minimum Energy Performance Certificate (EPC) rating of C by 2028 (existing rental properties by 2030). Failing to meet these standards could result in fines and restrictions. Additionally, tenants are prioritising energy-efficient homes to lower their utility bills, making retrofitting a key factor in maintaining occupancy rates and rental yields. By utilising landlord retrofit grants and retrofit funding schemes, landlords can make essential upgrades, improve property value and future-proof their investments while contributing to more sustainable greener housing.

Landlord Retrofit Grants and Funding Schemes to Consider

1. Energy Company Obligation (ECO) Scheme

The ECO scheme is a government initiative that obliges larger energy suppliers to fund energy-saving measures in domestic properties. Landlords may be eligible for funding to install insulation, boiler replacements, insulation upgrades and other energy-saving improvements, particularly if targeting low-income households, but may be required to pay partially towards the upgrades.

Eligibility Criteria:

Properties with an Energy Performance Certificate (EPC) rating of D to G.

Application Process:

• Contact your local council or energy supplier to inquire about the scheme.

• An assessment will be conducted to determine suitable improvements.

2. Home Upgrade Grant

This government-funded grant assists property owners, including landlords, with free energy-saving home upgrades. This includes insulation and energy efficiency improvements for “hard-to-heat” homes without mains gas heating. Eligibility requires an annual household income of less than £36,000, with applications handled by local councils.

Eligibility Criteria:

• Properties with an EPC rating of D or below.

• Households with an annual income under £36,000.

• Properties without mains gas heating.

Application Process:

• Reach out to your local council to express interest.

• Provide necessary documentation, including proof of income and property EPC rating.

• Upon approval, coordinate with approved contractors to implement improvements.

3. Green Buy-to-Let Mortgages

Certain financial institutions offer green mortgages that provide incentives, such as reduced interest rates, to landlords who own or purchase energy-efficient properties. These products are designed to encourage investment in properties with higher EPC ratings.

Eligibility Criteria:

• Properties with an EPC rating of C or above.

• Landlords seeking to purchase or refinance energy-efficient properties.

Application Process:

• Research financial institutions offering green buy-to-let mortgages.

• Prepare necessary documentation, including the property's EPC certificate.

• Submit an application highlighting the property's energy efficiency credentials.

4. Local Council Grants

Some local councils offer grants to landlords for property improvements aimed at enhancing energy efficiency. These grants can cover various upgrades, including insulation and heating. It is advisable to check with your local authority for specific programmes and eligibility criteria.

Eligibility Criteria:

• Vary by council and typically focus on properties with lower EPC ratings.

• May target specific property types.

Application Process:

• Contact your local council's housing or environmental department.

• Inquire about available grants and their specific requirements.

• Submit the required documentation and await approval.

5. Boiler Upgrade Scheme

This scheme provides grants to property owners, including landlords, to support the installation of energy-efficient heating systems, such as biomass boilers and heat pumps. The goal is to replace old, inefficient boilers with more sustainable alternatives.

Eligibility Criteria:

• Properties in England and Wales.

• Properties with fossil fuel heating systems needing to be replaced with eligible technologies such as heat pumps.

Application Process:

• Engage a Microgeneration Certification Scheme (MCS) registered installer.

• The installer will apply for the grant on your behalf.

• Once approved, the grant amount is deducted from the installation cost.

6. Wall and Loft Insulation Grants

Grants are available for cavity wall insulation, internal wall insulation and loft or roof insulation, particularly for properties where the main heating source is electric. These improvements can significantly enhance a property's energy efficiency.

Eligibility Criteria:

• Properties lacking adequate insulation.

• Priority may be given to properties with lower EPC ratings.

Application Process:

• Contact energy suppliers or local councils to inquire about available grants.

• An assessment will be conducted to identify necessary insulation improvements.

• Approved contractors will carry out the installation upon grant approval.

Benefits of Retrofitting Rental Properties

Investing in energy efficiency not only ensures compliance with regulations but also offers other potential benefits, including:

• Increased Property Value: Energy-efficient properties can attract a premium, potentially increasing their market value. Buyers and investors are prioritising homes with lower running costs and sustainable features, making well-insulated and energy-efficient properties more desirable. Upgrading to modern heating systems, installing insulation and improving a property's EPC rating can enhance its appeal in the long term, providing landlords with a competitive edge in the rental market.

• Enhanced Tenant Appeal: Lower energy bills and improved comfort make properties more attractive to prospective tenants. With rising energy costs, tenants are actively seeking homes that are cheaper to heat, making energy-efficient rental properties more competitive. Features such as double glazing, efficient boilers and proper insulation contribute to a more comfortable living environment, which can improve tenant retention and reduce costly void periods.

• Regulatory Compliance: Meeting energy efficiency standards helps avoid potential fines and ensures adherence to legal requirements. The government has implemented stricter regulations around rental property energy performance, with the expectation that all new rental properties achieve at least an EPC rating of C by 2028 and existing rental properties by 2030. Non-compliant landlords may face financial penalties or restrictions on letting their properties, making proactive retrofitting a crucial step in maintaining long-term profitability and compliance.

Conclusion

Retrofitting rental properties is a necessity for buy-to-let landlords looking to stay ahead in the evolving property market. By taking advantage of retrofit funding schemes, landlord retrofit grants and other financial incentives, landlords can improve their properties’ energy efficiency, enhance tenant satisfaction and ensure compliance with government regulations. Investing in retrofitting not only reduces long-term costs but also boosts potential property value and sustainability. With various grants and funding options available, now is the perfect time to explore these opportunities and future-proof your rental portfolio.

FAQs

Q. What is an Energy Performance Certificate (EPC)?

A. An EPC provides information about a property's energy use, rating its energy efficiency from A (most efficient) to G (least efficient).

Q. Are there penalties for not meeting the required EPC standards?

A. Yes, landlords may face fines and restrictions on renting out properties that do not meet the minimum EPC standards set by the government.

Q. Can I apply for multiple grants simultaneously?

A. It is possible, but some schemes may have stipulations against double funding. It is essential to check the specific terms of each grant.

Q. How long does the application process take?

A. The duration varies depending on the scheme and local authority. It is advisable to start the process well in advance of any planned renovations.

Q. Do these grants cover the full cost of improvements?

A. Not always. While some grants may cover a significant portion, landlords will also need to contribute to overall costs.

Q. Are there specific contractors I must use for installations?

A. Yes, many schemes require the use of approved or certified contractors to ensure quality and compliance with standards.

Q. How often do EPC regulations change?

A. EPC regulations can evolve with governmental policies. It is crucial to stay updated with current standards and upcoming changes.

Q. Can I pass the cost of retrofitting onto my tenants?

A. Directly passing costs to tenants is generally not permissible. However, improved energy efficiency could justify reasonable rent increases due to enhanced property value and reduced utility bills.

Q. What if my property is listed or in a conservation area?

A. Special permissions may be required for certain improvements. Consult your local planning authority before proceeding.

Q. Where can I find more information on these schemes?

A. Government websites, local council offices and professional landlord associations are common sources for up-to-date information.