Rating EPC Ratings: Assessing the Good, the Bad, and the Overlooked

Winter 2024

Energy Performance Certificates (EPCs)have gained recognition as a tool for evaluating the energy efficiency of buildings. In theory, this system provides a platform for improvement, offering a standardized way to assess and communicate a property’s energy performance to potential buyers or tenants. However, a closer examination reveals a complex landscape of benefits, shortcomings, and government inactions / failings that warrants scrutiny.

The Good: Ambitions of EPC Ratings

At first glance, the ambitions and positive aspects of EPC ratings are apparent:

Reduced Carbon Footprint: One of the most significant benefits of improving energy efficiency is the reduction of carbon emissions. As the world grapples with the effects of climate change, lower carbon emissions align with global efforts to combat this urgent issue.

Conservation of Resources: Energy-efficient homes tend to consume fewer resources including those derived from fossil fuels. This reduction in consumption leads to a decrease in the depletion of natural resources, promoting sustainability.

Lower Energy Bills: Improved energy efficiency directly translates to lower energy bills for homeowners and tenants. This not only saves money but also encourages more responsible energy use.

Increased Property Value: Properties with higher EPC ratings are more attractive to prospective tenants or buyers, as they offer the promise of long-term savings on energy bills. As a result, these properties can (in theory) command higher rental or sale prices. However, this relationship does not appear to be linear.

Tax Incentives & Grants: In the UK, the government sometimes provides tax reliefs, incentives, and grants to properties with high EPC ratings or those looking to improve their ratings. This financial support can help offset the costs of energy-efficient upgrades.

Risk Management: The theory is that as environmental regulations become more stringent, properties with higher EPC ratings are less likely to face compliance issues. This helps to ensure the longevity and sustainability of the property investment.

Temperature Regulation: Energy-efficient homes tend to maintain more consistent temperatures, providing greater comfort to occupants during both winter and summer months.

Health Benefits: Proper insulation and ventilation, common in homes with good EPC ratings, reduce the risk of dampness and mould, leading to a healthier living environment. The importance of indoor air quality is increasingly being recognised as central to health and well-being.

The Bad: Limitations of EPC Ratings

However, the seemingly straightforward concept of EPC ratings harbours several limitations:

A Simplistic Snapshot: EPC ratings provide a one-time assessment of a property’s energy efficiency, relying on a set of assumptions and calculations that may not accurately represent a property’s long-term performance. This static snapshot can be valid for up to 10 years yet fails to capture the dynamic nature of energy consumption, which can vary over time due to factors like changing occupancy, technological advancements, and shifts in weather and climate.

Limited Scope: EPC ratings focus primarily on energy efficiency and carbon emissions, offering an incomplete picture of a building’s environmental impact. These ratings don’t account for crucial factors such as water consumption, waste management, or the sustainability of construction materials used in the building. This narrow focus leaves out important dimensions of a property’s wider environmental performance.

Variability and Inconsistency: EPC assessments vary in quality and accuracy due to differences in assessors’ expertise and diligence. As a result, two different assessors may assign different ratings to the same property, raising questions about the reliability and consistency of EPC ratings. Previous research suggests that up to 15% of EPC ratings may be inaccurate.

Real-World Performance: EPC ratings are based on theoretical models rather than real-world data. This can lead to a significant disconnect between the rating and a property’s actual energy consumption. Property owners may make investment decisions based on these ratings that do not align with their actual energy needs or costs.

Lack of Incentive for Behavioural Change: EPC ratings do not encourage occupants to adopt energy-efficient behaviours or invest in energy-saving appliances. In essence, they focus on the property’s infrastructure while ignoring the significant role occupants play in overall energy consumption.

Property Character: Older and historically significant properties may have unique architectural and structural features that make energy-efficient upgrades challenging without compromising their character. This raises concerns about preserving our cultural heritage while pursuing energy efficiency goals. Moreover, there is an identified rural – urban energy gap, driven by the age and type of homes which on average, means that older rural homes perform worse than urban equivalents.

The Overlooked: Government Failings

Government incentives are crucial to drive change, but these incentives have been largely absent or ineffective:

Inconsistent / Absent Enforcement:Regulations around EPC ratings are inconsistently enforced, if at all, making it difficult to ensure that property owners are genuinely motivated to improve their environmental performance. Ambiguities in assessment and enforcement undermine the effectiveness of the metrics and policies.

Emphasis on New Construction: Government regulation has focused on enhancing the standards of new property construction over the renovation of existing properties.  Whilst this drives up the efficiency of new buildings it leaves the bulk of built assets behind. Nearly a quarter of UK homes (6.2m properties) were built before 1919 and remain responsible for a significant proportion of greenhouse gas emissions. This approach has not incentivised property owners to invest in older buildings, leading to the neglect of historically and culturally valuable structures.

Economic and Regulatory Hurdles: The upfront costs of improving EPC ratings can be substantial, and the return on investment is often slow, rendering it almost commercially unviable, especially in older or rural properties. Economic constraints, coupled with (local) regulatory difficulties, can dissuade property owners from making meaningful improvements, even when they’re motivated and committed to doing so. Whilst exemptions are available on this basis, they maintain the status quo without addressing the problem.

Critics Should Bring Solutions

I believe that critics should also offer solutions so here goes.

If the government genuinely wants to encourage people to improve the environmental performance of built properties, they should consider a multifaceted approach that combines elements of incentives, regulations, and education, and they should pay for it not just announce it:

Long-Term Commitment: Take politics out of the environment. Develop a cross-party group to lead on the development of long-term commitments that all parties commit only to building upon for a generation, adjusting to embrace new technologies and approaches. Property owners need confidence that investments in sustainability will pay off in the long run. Short-term or inconsistent policies can discourage long-term planning, and political flip-flopping helps no one.

Financial Incentives: Offer financial incentives to property owners who invest in energy-efficient upgrades and sustainable practices. This can include tax credits, grants, and low-interest loans. Subsidies for the installation of solar panels, energy-efficient HVAC systems, and insulation can significantly encourage property owners to make green improvements. Make the incentives accessible and understandable. Take-up of the limited existing incentives is not straightforward and should be improved.

Energy Performance Contracts: Introduce energy performance contracts for public and larger private buildings. These contracts allow property owners to work with energy service companies to improve the energy efficiency of their properties without incurring upfront costs. The savings from reduced energy consumption can then be used to pay back the investment over time.

Transparency and Education: Make information about a property’s environmental performance more accessible. This includes providing clear and comprehensive environmental performance certificates that go beyond just energy efficiency, and instead, taking into account water usage, waste management, and the use of sustainable materials. Property owners and tenants should be educated about the benefits of sustainable living and the available incentives. Green credentials are increasingly being used to sell new homes – these could apply to more historic properties too where upgrades have been made.

Benchmarking and Reporting: Mandate property owners to benchmark and report their properties’ energy consumption and environmental performance. This transparency can create a competitive environment where property owners strive to outperform one another, benefiting both the environment and their bottom line.

Public Awareness Campaigns: Launch public awareness campaigns about the importance of sustainable living and the benefits of green buildings. These campaigns can include success stories, tips for energy-efficient living, and the long-term cost savings associated with eco-friendly practices. These are wholly compatible with the current cost of living and energy crises.

Support for Older Buildings: Recognise the challenges of upgrading older and historically significant buildings. Create tailored incentives and regulations that take into account the unique characteristics of these properties, encouraging their preservation and improvement.

Research and Development: Invest in research and development in green building technologies and practices through private sector business – taking small equity stakes in these start-up companies, exiting early when technology proves successful reinvesting in other start-up businesses. Hundreds of failed start-ups would be better value for money than widespread public sector inactivity and inertia. Innovations in construction materials, energy-efficient technologies, and sustainable architectural design can drive progress in environmental performance. Potentially a huge opportunity to support new green jobs and skills.

Opening at the Close

EPC ratings, while conceptually a step in the right direction, are not the panacea for promoting environmental sustainability in built properties that they are promised to be. They fall short in several critical areas and, in their current form, often discourage property owners from embracing more comprehensive environmental improvements.

If we genuinely want to improve the environmental performance of the built environment, we must recognize the limitations of EPC ratings and address the broader spectrum of environmental challenges. To make meaningful improvements, incentives should be structured in a way that promotes holistic sustainability, encourages innovation, and provides support for property owners, especially those with older or historically significant properties.

Ultimately, the environmental performance of built property should be measured by metrics that encompass a full range of sustainability factors. It’s only through a combination of the right metrics and well-considered incentives and interventions that we can hope to drive substantial and lasting improvements in the environmental impact of our built environment. EPC ratings can be part of the solution, but they need refinement to truly make a positive impact on our path toward a more sustainable future.

The concept is sound, but sadly, as is so often the case, the execution requires a more nuanced approach, commercially minded investment and a broader perspective to address the challenges effectively.

For our part, we’re going to continue working hard to provide homes for people in the rural economy, trying to find ways to cost-effectively improve our built environmental performance alongside our commitment to Scaling Conservation for people and wildlife.

Written in collaboration with our wonderful Planning & Property Director Fiona Milden


Rich Stockdale
Managing Director