In this episode of The LandlordZONE, hosts Nigel Lewis and Eddie Hooker sit down with Damian Thompson, Director of The Mortgage Works at Nationwide, to unpack the future of Energy Performance Certificates (EPCs) and what they really mean for landlords. With looming MEES changes, mounting upgrade costs, and a tangle of grants, loans and exemptions, the episode cuts through the noise.
What are lenders like Nationwide doing to support landlords? Are EPC upgrades as unaffordable as some claim – or are simple fixes enough for many? And how will the new Decent Homes Standard and EPC methodology shake up what landlords must do next? Tune in for straight answers in a time of policy uncertainty.
Nigel Lewis: Hi, my name is Nigel Lewis. I'm Head of Content at LandlordZONE, and we are here today to talk about EPCs. We have some expertise in the room with me, which is of course ..
Eddie Hooker: Hooker. I forgot my boss's own name. Keep that in. This is always a good start and also we have Damian Thompson who, to use your formal title, would be Head of Landlord Mortgages at the Nationwide.
Damian Thompson: Yeah. Yeah, that's it
Nigel Lewis: Good. Welcome to the podcast. At least I remembered your name so all good.
Damian Thompson: Thanks for having me.
Nigel Lewis: Lovely to have you here. Thank you for coming up to Borehamwood, we appreciate that. So I think the first question is always going to be, where are we with EPCs right now? What's, what's your view of where the process is has got to?
Damian Thompson: So I think it's a really interesting place to start, so maybe for your viewers will be interested in, just to describe what they are. So an EPC measures a property’s energy efficiency, rating it from A most efficient to G less efficient.
Whilst the minimum energy efficiency standards set a legal minimum EPC rating required for rental properties, so I think important to kind of start there, because I think that context is really interesting. We've got EPCs, but we've also got this thing called MEES, which the government is consulting on.
Nigel Lewis:Yes.
Damian Thompson: And therefore the focus of the UK government is to try to get all rental properties to C so if you're a landlord today with a property rating of C or property rating of B, likely you're going to be OK within the new limit. But if you're a D or an E, you're gonna have to raise your standards to be able to get a C.
Nigel Lewis: Absolutely. And it's always been interesting in that some people say a percentage of the market is F. Which is, which means they are being rented illegally. Or it can't be rented?
Eddie Hooker: Well, I think the main question I've got. Obviously most people know when an EPC is taken. So when you buy the property you get an EPC if. How often do you need to update your EPC?
Damian Thompson: Every ten years. So there could be properties
Eddie Hooker: That actually now do fit the standard.
Damian Thompson: There could be properties. And in particular, if you've got a mortgaged property, it is likely if you want to remortgage, you're gonna have to check your EPC rating. So if you're in the mortgage cycle, it's likely if you move or remortgage, you're going to have to get an EPC. The challenge is for people who aren't. They don't have a mortgage on the property, so actually there's no interaction with finance that drives them to get the upgraded. You'd be hopeful if they're letting through a letting agent that the letting agent is keeping them aware of that, but maybe if they're not, that's the area where some people may not recognise that they need to have EPC rates.
Eddie Hooker: So around about 20% of landlords have a mortgage? Yeah. So it's quite a large percentage that won't have a lender driving the EPC update, and around about 51% of landlords don't use a letting agent. So they're self managing. So there's actually quite a large cohort, which is quite an interesting stat. Yeah, that actually won't be in a position or won't have thought or won't be reminded to update their EPC and I think that’s a really good stat.
Damian Thompson: And I think it's really important. One of the reasons that we want to come and do these podcasts is because I think it's important for people to recognise their responsibilities and any message we can get out to good landlords to say this is coming. You need to be on, dealing with it, I think is really important.
Nigel Lewis: Just before we forget there is only three years. I know these are all proposals at the moment and the consultations finish in England in Wales is about to finish soon in Scotland but we are still in a place where it's three years.
Damian Thompson: And I think the challenge that the challenge that we are calling out, particularly to the government is people need certainty. So one of the reasons landlords don't act is they're not certain what are the proposal and the means, what's the new EPC going to actually mean that I physically have to do and until people get that certainty, they can't act. And therefore for us, one of the really important things is that we are relying on dates. So if you take for example, to get to the deadline that you talked about, we would need to be currently doing 2000 hoses a day.
Eddie Hooker: Wow, yeah.
Damian Thompson: Actually getting that finished so the two year deadline is very strict now in Scotland they've said 2033. And therefore, we hope that as the proposals come through, the government will think of that, but even with that, alongside building 1 1/2 million homes, doing social housing, this is still a massive challenge to have enough people to be able to do this work. So until landlords get certainty. Whatever I'm supposed to do. Then they need to think about how are they going to do it. How am I going to finance it, because there’s going to be challenges.
Eddie Hooker: So. So yeah, making an assumption for the moment because unfortunately. We don't know the actual date, but making an assumption that we're looking at a 2028 to 2030 deadline. I'm just going to jump right to the end of the process. What happens to that landlord if their property as at the date of these new regulations, is not up
Nigel Lewis: Well, it's assuming that any councils left to enforce the rules then they won't be able to rent out the property or get a mortgage.
Eddie Hooker: And making that assumption, because I think to get people to think about this is what is the repercussions if you don't do it?
Damian Thompson: The repercussions is I just said, is that legally, you're not entitled to rent that property, you know, and therefore councils will have the authority to act on that. Landlords could face fines, other pieces for not bringing regulations. And I think absolutely.
Eddie Hooker: That's a very important point for the listeners.
Nigel Lewis: I was just curious and you may not know. I was going to ask you which is perhaps your internal data or industry data. You maybe see that the people watching. What percentage or you know how difficult is it for people getting from D to C? My personal opinion is or feeling is it's quite easy to get from D to C but getting from E to C is usually a much more expensive stretch.
Damian Thompson: And I think it's one of the interesting things about we have a very unique building situation within the UK. We've got older homes, we've got listed homes, we've got homes that have been built pre war post war. So therefore getting from D to C should usually be simple. But once again, if you go back to what is the new management going to actually when you have to do that could be the challenge. So you know, one of the things that we're particularly concerned about would be depending on what work the landlord needs to do, can the tenant stay in situ? Or is some of the work so challenging that tenant will have to leave?
Nigel Lewis: Internal insulation panels…
Damian Thompson: Internal installations, stuff that they need to do. Then you get to a point where the tenant then leaves and therefore we've come to this point, everybody's trying to get it done. Tenants are being exited. There's not enough social housing built, therefore, that’s the reason we kind of want that timeline to think about stretching out is you need to have the resources, you need to have the clarity, you need to be certain that landlords can choose how they'll be able to do that work. And most importantly, we want tenants to be in a position that they've got some certainty about what it means for them. If we get everybody doing the work at the same time, and having people to leave their properties. That could be a big challenge for councils and local authorities.
Eddie Hooker: I think the national residential landlords stated that their research suggested that the average landlord where the EPC was an E or F it would be around about 20 to £25,000’s worth of additional investment to bring it up to a C. So I do like your comment Damian on the D to C. That's probably an easier jump. But there's a lot of Victorian properties in the UK where just by the nature of their build, yeah, they're going to be in the E or F category. And I think that’s an important thing to note that there will be cost involved and we'll talk a little bit later on about where we can get some support from a lender point of view, Daiman, from a lender point of view, when you are lending money. Yeah. And let’s say the law goes through, say 2030, and you are looking to lend. You will look at that EPC certificate and if it is below A C, will that mean you won't lend?
Damian Thompson :I think I think it'll be. If you think about where we need to get to if we get to a stage where, let's say it's a year pass, so it's very clear this is where you need to get to. I don't think lenders will lend if it's beyond that. I think the opportunity and the things that we currently think of as we've got, for example agreeing further advance where people could come and borrow the additional money to do the work, but the challenge is well, what am I doing? So if I go and invest, I'm clear that the work I'm going to do is going to get me there. So I think lenders will support with the finance available to help landlords to get to where they need to get to once they've got clarity.
Eddie Hooker: Yeah.
Damian Thompson: But I think we also are concerned that some of the caps are very blunt, so you know, depending on the value of the property to spend up to 15,000 is a larger percentage for someone with a £70,000 mortgage or property, and therefore have mostly got the most vulnerable of people in society and those. And therefore if you putting them to that cap and they can't afford to do it, then you're doing the right thing.
Eddie Hooker: Yeah.
Damian Thompson: So we are very keen to see maybe linking the cap to the Council tax banding so that you get more appropriate levels and we think 15,000 is just too big a gap depending on the size of the property. So to your point, I think we will step back, we will support, we'll do everything we can do to help them to be able to get to where they need to. But that certainty is the biggest driver. And then I think people can plan.
Nigel Lewis: And jus to be clear for our viewers, the cap means that that's the maximum that the government has set, that a landlord will spend, after which they get exemptions, so, but that is how much you are gonna spend if that's what's needed on it, right? Yeah.
Damian Thompson: Yes. So therefore, you know, if you've got and I think one challenge is if you've got a portfolio of properties, you've got different levels of income and rent. Your ability to think about how you might finance that is, you know through number of different means. If you've got one or two properties we think that's where landlords at that level a cap will kind of go. This is a bit too much of a challenge.
Eddie Hooker: Yeah. And of course, jumping again to an assumption, I've just talked about new lending. What about renewal lending? So remortgaging. So if I've got a mortgage with you, Damien, and actually I come to remortgage…
Damian Thompson: And you don't have the right level of EPC.
Eddie Hooker:And I suddenly and I'm thinking, well, I can't get finance for this now. And I certainly don't have the cash in my….
Nigel Lewis:Will you go into the variable rate, which might be?
Eddie Hooker: Yeah. So has anyone thought about that currently?
Damian Thompson: I think lenders are thinking about it and therefore I think the thing that we're really trying to do is to represent to the government through all of our interactions that this is a nuanced issue and will require nuanced solutions rather than a one size fits all.
Eddie Hooker: Yeah.
Damian Thompson: And therefore that level of conversation we're trying to engage is to kind of line up on the times scales, give landlords enough time. Think about the supply chain and capability to get the work done in terms of the right levels of skills that we invest in, in the people that are going to be future retrofitters of tomorrow to get this work done, and then we're thinking about, how do you think about lower value properties, properties that are challenging? And I think one of the things we think about too as well is maybe should we start at getting some properties to C rather than trying to get them all to C so, so, so think about how you might support them being able to do that, because what we'd like to see out of this is more properties to C - we all agreed on getting that energy efficiency standard is something that we fully support. We’d all like to see people get there but we want to make sure that we don’t have unintended consequences by not thinking through the solutions.
Nigel Lewis: So just to just to quickly summarise where we are with the finance side of it, so I think there's four, maybe five schemes available which is a mixture of loans and grants you can get. I think the most prevalent is the warm homes local grants, so you can go to your local council or directly I think for that money, you may not get it, but you can at least apply for it. But the interesting thing is that at the moment lenders, including yourself, if I'm right say, you can have this green loan, but your EPC has to be a C then you get a lower interest rate, but you will also lend them a standard amount of money, well standard rate without the EPC..
Damian Thompson: So I think the conversation that we kind of get to is there's a number of things that are available. There's a warm homes grant, there's a boiler upgrade scheme, there's green laws on offer and there are eco grants, great British insulation scheme, etc. So there are a number of different schemes available to landlords. I think one of the most important things for landlords are find your letting agents. Find a really strong source of information that can guide you and help you, look on our websites. Look on your lender’s website and see the information that's available to you and I think things like these podcasts really helping people to get interested in what's going on and then going to find solutions is the right thing.
Eddie Hooker: It's start now because even if it is 2033.
Damian Thompson: Yeah, it is.
Eddie Hooker:
You know, I mean, we remember what we were doing in 2020. And that was five years, yeah.
Nigel Lewis That's I know, I know.
Eddie Hooker: So five years, it's not a long time to start thinking about this.
Nigel Lewis: I was. I was gonna say maybe a parting shot here is you have connections with government. Assume being as you were saying like the number 2 lender in the UK and as a sizable one. Nevertheless in terms of how much you that your book is? As they say in industry, but does that give you leverage in government circles to understand where they're going? Can you give a snippet on where would the sort of policy thrust is?
Damian Thompson: So I think the policy of thrust is quite common I wouldn’t have anything to add to the thrust. I think. I think what we would say is we are constantly making representations to the government, particularly around the energy schemes, to say we believe there's some nuanced things that you need to think about, some things that we've just described, we're happy to come on board and help you to think about how you'd be able to do it. But also we're saying to this point, we want to get out and help to educate more landlords, particularly on the things they need to do - some content on our websites, we're doing surveys with customers, so we understand what the things they're thinking about, as much influence as we can play through government and through other companies trying to bring the industry together to kind of represent these things directly.
Nigel Lewis: Because you don't want to be a landlord, and in late 2027 be suddenly waking up and going oh, my lord, I've got to get my mortgage sorted, I've got to get the EPC sorted. I've gotta get a grant sorted and it's even if they're given an extra year by the lenders it's still, that's what, 18 months to do quite a lot.
Damian Thompson: Quite a lot of work and I think the main thing for us is being very clear what the standard is. So landlords will not act until they know this is what I'm acting to. So therefore to your point, they've got to start thinking about it and we've got to get clarity on what standards are and then they've got to act.
Eddie Hooker: Do you think it's good advice, Damian, to suggest to landlords to reevaluate their energy rating now? So that they know what to do.
Damian Thompson: I think everybody should know the current circumstances that they're in 100%. I think that they should do. And I think the letting agents will help with that as you come into new tenancies etc. If you haven't got the letting agency, you need to do some thinking about in the long term is this the right thing for me to do.
Eddie Hooker: Because I think, yeah. Even with the letting agency market, I mean, they're generally, you know, for many letting agents, not all, they will drive the you need to have an EPC rating as it's coming up a year before say the actual expiry date. But if you've had, if you've bought a property three years ago and you had the, it was an F. Yeah, but you've been doing a little bit of work on it as the void periods come up, no one's going to really remind you until.
Damian Thompson: No.
Eddie Hooker: 2030, 2031
Nigel Lewis: You can't get a mortgage.
Eddie Hooker: Well, I don't want to. I don't want to make the EPC market rich necessarily. But is it worth landlords now saying, well, actually I don't really know where mine is, it was an F or it was an E but I have been playing around with the insulation. And there was a new boiler. Is it worth people reassessing now?
Damian Thompson: I think people reassessing now is always useful. I guess the conversation though is back to that point. If there are gonna be new standards.
Eddie Hooker: What are those?
Damian Thompson: Then one of those standards, so kind of evaluating now and going OK. I'm all right. There's nothing else I need to do when their new standards come out is some place that we don't really want landlords to be because they may get a false belief that, OK, I'm all right. It doesn't make a C. So that's why we're really pushing clarify very quickly for people what it is, what's that gonna look like so they can make informed decisions? It's a very tough choice, but I think people need to know what they're working to.
Eddie Hooker: I think there's going to be an impact on insurance as well here, because if you've got a property insured and it does not meet the standards. Yeah, when the law comes in, when the rules come in and a claim happens, there is a chance an insurance company could turn around and say, well, you're in breach of the regulation and therefore we are not paying out that flood, that fire.
Nigel Lewis: Or even rent guarantees.
Eddie Hooker: Or even rent guarantee insurance, so the implications, Damian, you’re saying, are quite wide.
Damian Thompson: And I think that's why we're, you know, back to that point. Clarity allows everybody to get their own and for landlords to understand what it is they need to do and get to some of the stuff that they want to do. The local councils can be clear about what they're going to do in their areas, how can they support landlords and doing that stuff, how can they put communication out to landlords, the NLRA. All the different organisations can start to flood the market with something that people generally can understand is the right way to go.
Eddie Hooker: Yeah, so, so you know coming towards the end. Let's focus, where can landlords currently find information about how they can start to think about this?
Damian Thompson: So I think there's stuff on the government’s websites, there are stuff in the lenders’ websites. So we've got a really our page that we share lots of information and we do lots of surveys of our landlords to say what is it you would like to know. So our content driven is driven by them telling us what they need to do. We do lots of research.
Eddie Hooker: So type in decent home standards, then into Google you'll get the information.
Damian Thompson: Type in decent homes standards. Then you get to see the information that you want to get to do. You see some of the things that you can naturally do if you're replacing a bulb in your property, they're putting an energy efficient one in. Yeah. You know, there are little things that you can start to think about as you get on to do that work. As you start thinking to yourself well you know, there's some stuff that I want to do here with a new tenancy and that kind of stuff. So as you start to get to some of these break points where you've got opportunities, I think try to get as much information as possible.
Eddie Hooker: And of course, the tenants getting educated as well, yeah.
Nigel Lewis: They can apply for grants
Eddie Hooker: That's right. So they can apply for grants as well.
Damian Thompson: And I think the ultimate thing that we always try to get across and it's something that I am very passionate about is we talk about rentals. But in reality this is their home. Yeah. So the person renting doesn't see it as a rent. This is someplace that I put my head in, home and therefore for them clarity means that alert landlords get certainty and they can then think about well, here are the things that I need to do in the long term. Here's the landlord is going to do some work but I understand why they're doing this work, because it's going to save me on my bills. It's going to help with efficiency at home. It's going to help with my, where I live my life and therefore I want to get this done so part of education is also going to be for tenants around your landlord is going to need to do some work.
So how can you help that landlord to do that work? And how can you and the landlord engage and it’s something I think landlords do naturally. It’s a relationship with the tenant just like we try to recognise it's a relationship with our landlords. So one of the things that we are thinking about now is, ok, so landlords are coming under more information, more things that need to do so. How do we simplify finance? How do we make it, if you're dealing with us, your life as simple as possible because we know you've got bigger things to think about with all this stuff that's going on. So I think lenders, the whole industry, letting agencies, if we get that certainty, we can just all corral around and yeah and help people to get a really clear path, really clear direction. Here's what you need to do. And if you get to the end of this road. You're going to be OK.
Eddie Hooker: Yeah. So I'm thinking overthinking this Nigel. Yeah, even from a letting agency point of view, especially with overseas landlord, the responsibility to ensure compliance is at.
Nigel Lewis: Well, well, we've been talking about landlords today a lot, but the percentage reality as in I think you were saying earlier, you know sort of the 30-40% of all people who will be doing this upgrade work are letting agents. So, we're obviously a landlord community here. Yeah. But it is the letting agents who will probably be quite linchpin in this as much as the landlords.
Damian Thompson: Yeah, they will be. I. Yeah. And I think that they'll be well geared up once they understand what that looks like because they can see the range of tenancies. They can see the stuff on their book to help and support landlords. And being able to do it, I guess from our situation, the worst thing we would want to see is landlords exiting when we could have, when they could have got enough information through the system to be able to make really informed decisions. And the reason we really care about that is because at the end of the day we want the tenant to be able to have someplace comfortable, warm and decent to live. So I think through all of this, we're trying to say to the government and trying to liaise with them on this. We’re saying please recognise this is a nuanced challenge. There's lots of people in this chain that we need to work through, but actually if we all come together and give clarity the lenders can really get behind making sure that the thing that we all want is energy efficiency in homes in the UK. And particularly for people in tenancies to be strong.
Eddie Hooker: And finally. Finally, when do you think we will get that clarity? So is this coming through? Will this be announced at the same time as we mentioned before?
Nigel Lewis: Any moment the English one.
Damian Thompson: Yeah, so the English one. We'll get some details. I think the challenge is we'll get the dates and stuff. But the EPC, what is an EPC isn’t until 2026.
Eddie Hooker: Wow, so we've still.
Damian Thompson: So we still have technical stuff, so anything that can bring forward that implementation, anything that can give give certainty to that and bring those dates closer together.
Eddie Hooker: Absolutely.
Damian Thompson: To give people the maximum time, I think the thing that we always get back to is in order to get to the deadline now, we need to be doing 2000 houses a day completed. So if you think about as you push that forward 12 to 18 months and therefore you know that that that bit of certainty for landlords, lack of worry for tenants. And clarity for the market and what they need to do is the most important thing. That we think.
Nigel Lewis: I think on that note, I will say thank you, Eddie Hooker. I will also say thank you, Damian Thompson, Nationwide, and I say thank you to you for watching.
Damian Thompson: Thank you.
