Why energy efficiency could decide the future of the rental market post-Renters’ Rights Act

However, while much of the conversation has focused on legal rights and tenancy security, there still remains the ever-present issue of energy efficiency in rental properties. 

As landlords face mounting pressure to provide better quality homes, the reforms could accelerate a divide between modern, energy-efficient properties and older, inefficient rental stock that is becoming increasingly expensive to maintain. 

Dan Alvarez, Group Chief Revenue Officer at Vertical, outlines the implications of this for those operating within the energy and housing sectors, why this is so significant, and how the future of the rental market is rapidly changing. 

Why are landlords who invest in efficient homes winning? 

The biggest winners from the reforms are likely to be landlords who have already invested in upgrading their properties. 

Homes with modern heating systems, improved insulation, smart energy controls and lower running costs are becoming more attractive from both a sustainability and financial perspective. 

Today, affordability for tenants is about more than just considering the cost of monthly rent, with tenants having to pay greater attention to the total cost of living in a property. A major element of this is energy bills. 

For the landlords who invest in energy efficient property upgrades, this creates a major competitive advantage. 

Efficient homes can help:

• reduce tenant turnover

• minimise complaints around damp and cold

• improve tenant satisfaction

• lower maintenance risks

• futureproof properties against tightening regulations 

At Vertical, across our various brands of Do Energy, The Student Energy Group and Tickd, we are seeing a growing demand from landlords and housing providers looking to improve their property performance through upgrading heating systems and implementing smarter energy management systems. 

The reforms have driven this shift, with it expected to further encourage a more professionalised rental market, as tenant expectations continue to rise and better quality homes are likely to see stronger demand. 

How can tenants benefit from lower running costs? 

For renters themselves, the reforms could bring benefits beyond greater security and protection from an energy efficiency point of view. 

Warmer and more efficient homes often mean significantly lower utility bills, a consideration that is becoming more important than location and price for renters during the cost-of-living crisis. 

A cheaper rental property with poor insulation and high heating costs may ultimately prove more expensive to live in than a slightly higher-priced property with lower monthly energy bills. Tenants are more aware of EPC ratings, heating system efficiency and overall running costs of rental properties. 

This shift in consumer behaviour is expected to place additional pressure on landlords with inefficient properties to upgrade or risk falling behind the market. 

What happens to the inefficient rental stock? 

While some landlords are well-positioned for the reforms, others may face growing challenges if they do not make changes quickly. 

Older homes with poor insulation, outdated boilers, inefficient radiators, mould issues or low EPC ratings could become increasingly difficult and expensive to operate. 

Coupled with this, tightening compliance standards provide tenants with more confidence to challenge poor living conditions, with landlords who delay upgrades potentially facing:

• higher maintenance costs

• increased void periods

• reduced tenant demand

• greater financial pressure to upgrade 

Many smaller or accidental landlords may ultimately decide the risks and costs of remaining in the market outweigh the benefits. These pressures could trigger a gradual reduction in available rental stock, particularly among ageing properties that require significant retrofit investment – delaying landlords from making profit.

Looking at the wider sector, we have seen that these changes has triggered a substantial need for practical retrofit support, offering landlords guidance around improving their property’s heating performance. This guidance and on-the-ground support of landlords is significantly increasing the role of providers like Vertical. 

Could rental reform reduce supply? 

One of the unintended consequences of the reforms could be reduced supply within the private rental sector. 

The risk of landlords leaving the market rather than invest in improvements means that renters may face fewer available homes and increased competition for high-quality properties. 

This could place upward pressure on rents in certain areas, with a widening divide between “futureproofed” rental homes and properties that are becoming economically unsustainable.

Have energy efficiency concerns changed the rental market?

Energy efficiency concerns for landlords have shifted. Investing in efficiency upgrades were once viewed as a sustainability “nice to have”, but now these are a commercial necessity for landlords trying to remain competitive, compliant and financially viable in the changing market.

As the market evolves, regulations and rights for tenants increase, landlords can expect their properties to be under more scrutiny, and should invest in:

• energy-efficient heating systems

• retrofit solutions

• smart controls

• insulation upgrades

• and technologies that help reduce household energy costs. 

At Vertical, we believe that the general rental market is entering a period where property standards, affordability and energy efficiency are becoming standard requirements. The landlords who wish to remain in the market must be quick to adapt and willing to invest in futureproofing the efficiency of their homes.

Dan Alvarez, Group Chief Revenue Officer, The Vertical Group