Energy Performance Certificates (EPCs) are changing and landlords need to pay attention. With the UK’s housing stock under pressure to become more energy efficient and meet climate goals, the government is transitioning to a new Home Energy Model (HEM) under the Future Homes Standard.

This change isn’t just bureaucratic. It will affect how much landlords pay for inspections, how lenders view properties, and ultimately, how profitable rental portfolios remain.

A Quick Refresher: What Are EPCs?

Energy Performance Certificates (EPCs) were introduced in 2007 as part of the EU’s Energy Performance of Buildings Directive. They rate properties on a scale from A (most efficient) to G (least efficient), based on estimated energy costs.

For landlords, EPCs have long been a compliance issue:

  • Legally required when letting or selling a property.
  • Minimum rating of E needed for most rental properties since 2020 under MEES (Minimum Energy Efficiency Standards).
  • Tenants and lenders increasingly consider EPCs when choosing properties.

The problem? EPCs often rely on assumptions and estimates, which means they can be inaccurate and unhelpful.

That’s what the new system aims to fix.

What’s Changing? The Shift to the Home Energy Model (HEM)

The government is phasing out the current EPC methodology (the Reduced Data SAP) and introducing the Home Energy Model (HEM). This sits within the Future Homes Standard, part of the UK’s plan to decarbonise homes.

Key changes include:

  • More accurate measurements: EPCs will now factor in actual window sizes, roof spaces, and insulation instead of relying on assumptions.
  • New age bands: Homes built from 2023 onwards get their own category, recognising advances in construction standards.
  • Inclusion of renewable tech: Solar panels, battery storage, and modern heating systems will be fully recognised.
  • Different recommendations: Reports will lean more toward heat pumps and low-carbon solutions instead of traditional boilers.

💡 NRLA notes that assessments are also expected to cost more. A typical inspection for a three-bed home is around £65 today, taking 30–40 minutes but with HEM, costs are likely to rise.

Why It Matters for Landlords

Although the government shelved plans to mandate a minimum EPC C rating by 2028, the UK’s legally binding 2050 Net Zero target is still in place.

That means efficiency regulations are still tightening, even if the exact deadlines shift.

The current EPC system prioritises running costs over carbon emissions, leading to quirks where installing a heat pump could actually lower a score because electricity is more expensive than gas.

The HEM fixes this by focusing on carbon impact instead. That makes EPCs a more reliable signal of true environmental performance and ensures retrofit advice is tailored to the property, not generic boilerplate text.

This matters because EPCs are no longer just “tick-box” forms. They’re becoming market-shaping metrics that influence:

  • Property value
  • Mortgage access
  • Tenant demand
  • Future compliance risks

NRLA supports the improved accuracy, but warns higher costs could squeeze landlords already facing financial strain.

The Financial Challenge

The biggest concern for landlords is cost. Retrofitting homes to higher standards isn’t cheap.

  • 59% of landlords say they’d consider leaving the market if forced to upgrade to EPC C by 2028 (Mortgage Solutions).
  • Average retrofit costs are estimated at £4,700+ per property, but could exceed £10,000 depending on property type.

Breakdown of potential upgrades:

  • Loft insulation: £500–£1,500
  • Wall insulation: £4,000–£8,000
  • Heat pump installation: £7,000–£12,000 (before grants)
  • Solar panels + battery storage: £6,000–£12,000

For landlords with multiple properties, the numbers add up quickly.

The Mortgage & Lending Impact

Banks and building societies are tightening their sustainability policies.

  • Some lenders already decline five-year fixed-rate mortgages on properties below EPC C because the term runs past potential regulation deadlines (Landlord Zone).
  • Lenders are beginning to use dynamic environmental data (smart meter usage, weather patterns, EPC registers) to assess property risks.

As Mark Blackwell (Cotality) put it:

“Meeting the challenge of net zero is not straightforward… it will require the co-operation of all parts of the market to achieve it in such a short time.”
(Landlord Zone)

In practice, this means inefficient homes could face:

  • Higher borrowing costs
  • Reduced loan-to-value (LTV) offers
  • Lower demand from buyers and tenants

Tools & Incentives for Landlords

It’s not all bad news. Some lenders and organisations are stepping up with support tools and financial incentives.

BM Solutions (Lloyds Banking Group)

  • Landlord Retrofit Tool: Built with the Energy Saving Trust, it gives personalised retrofit plans with cost estimates, carbon impact, EPC uplift, and grant availability.
  • Lower mortgage rates: Discounted rates for properties with EPC A–C (BM Solutions).
  • Educational resources: Guides and sustainability updates available for brokers and landlords.
“Improving the energy efficiency of properties can future-proof a portfolio and potentially add to its value… we have seen countless landlords willing to invest in efficiency improvements.”
(Mortgage Solutions)

Government Support

  • Boiler Upgrade Scheme: Grants of up to £7,500 for heat pump installations.
  • ECO+ (Great British Insulation Scheme): Help with insulation costs for eligible households.
  • Local Authority Schemes: Some councils offer grants or loans for retrofit projects.

Landlord Sentiment: A Divided Market

There’s no denying landlord opinion is split.

  • Some see retrofitting as a value-adding investment - lowering bills, attracting tenants, and future-proofing against regulation.
  • Others fear it will wipe out profitability and force portfolio reductions.

With higher borrowing costs, inflation, and tax changes already squeezing the sector, energy regulations may accelerate an exit of smaller landlords - while institutional investors with deep pockets adapt more easily.

This could reshape the rental market over the next decade.

What Landlords Should Do Now

With uncertainty over exact deadlines, the smart approach is to act early. Here’s a roadmap:

  1. Track policy updates via Gov.UK and NRLA.
  2. Get an up-to-date EPC now to understand your baseline.
  3. Use tools like BM Solutions’ Retrofit Tool to model upgrade costs.
  4. Budget ahead - even small works (insulation, draught-proofing) can add up over time.
  5. Explore grants like the Boiler Upgrade Scheme.
  6. Review mortgage terms - lenders are moving toward green-linked products.
  7. Prioritise properties with expiring EPCs - renew them under the new model when possible.
  8. Speak with tenants about efficiency improvements - many welcome lower energy bills.
  9. Plan for heat pump adoption - costs are falling, and government support is rising.
  10. Keep records of all improvements for future valuations and compliance checks.

The Bottom Line

EPCs are no longer just certificates to tick off when letting or selling a property. Under the new Home Energy Model, they’re evolving into key market indicators that affect value, financing, tenant demand, and long-term compliance.

Landlords who act early - by budgeting for retrofits, using available tools, and aligning with lender expectations — won’t just stay compliant. They’ll:

  • Protect and grow portfolio value
  • Attract quality tenants
  • Access cheaper mortgages
  • Position themselves ahead of regulatory shifts

The transition won’t be easy, but with the right strategy, it’s an opportunity to future-proof your portfolio in a greener housing market.