The government is introducing what is known as the ‘Green Tax’, which will force landlords to pay in advance for improvements in energy efficiency for rented properties.
This could cost landlords up to £5,000 for each property that they own, said PropertySecrets.net in an August 2016 article.
The government requires all landlords to improve their properties so that they are energy efficient. This means filling cavity walls, installing insulation, energy efficient boilers and similar improvements. These measures should help tenants slash their fuel bills and make homes more environmentally friendly. By April 2018, all rented property must achieve at least Band E energy efficiency rating. Landlords must pay the costs of upgrading all their properties.
To avoid these charges landlords can buy more modern properties that are already energy efficient. Jonathan Stephens, the managing director of property investment firm Surrenden Invest, was quoted in the aforementioned PropertySecrets.net article as saying:
“This change to legislation for buy-to-let landlords will cause savvy investors to seek out opportunities that already meet the new requirements, a future-proof investment.”
Stephens gave the example of a new residential development, One Cross Street in Manchester, which has a Band A energy efficiency rating. This means that investors in this development will not have to pay the ‘Green Tax’.
With the recent rise in stamp duty on buy-to-let properties, and the reduction of tax relief for commercial mortgage interest payments, investors may prefer to invest in more up-to-date properties to avoid the additional costs of installing energy-related improvements.