In September 2023, the government announced that it was scrapping plans to require domestic landlords to upgrade properties to a minimum EPC rating of E. Now, it seems the government is taking a similar line on Minimum Energy Efficiency Standards (MEES) for commercial buildings.
On the 26th of October, 2023, the government released a lengthy response to the Climate Change Committee's July report to Parliament on national progress towards the 2050 Net Zero emissions target. Buried on page 396 is a recommendation that the government should respond to a 2021 consultation on “finalising and implementing” plans for MEES for the non-domestic private rented sector (point number 2023-187).
The proposed changes to the EPC scheme were to set a minimum EPC target of C by 2027 and B by 2030. These were included in a consultation report titled The Non-Domestic Private Rented Sector Minimum Energy Efficiency Standards – The Future Trajectory to 2030. The consultation ended in January 2020.
The commercial property sector responded accordingly, with a surge in energy-efficiency-focused refurbishments aimed at upgrading buildings (see our report on Low carbon retrofit). However, the government's response to the CCC may give them pause.
It states: "The proposed timelines within the original consultation will require updating to allow sufficient lead times for landlords and the supply chain.”
In addition, the response to the CCC also notes that the government is “working hard to review the policy design to ensure it remains fair and appropriate for landlords and tenants,” adding that it plans to publish further information “in due course”.
Perhaps many in the industry won’t be surprised by the government’s softening of its proposed deadlines for higher commercial EPC targets. The government’s explanation that it will allow more time to develop a ‘fair’ approach seems reasonable enough.
However, it could also be said that such a step could cause significant problems. In the short term, the construction sector could see refurbishment work drying up just as the industry is emerging from a very bumpy few years. Justifying budgets for electrification of heating, for example, could be more challenging for facilities teams.
And, as the government has pointed out, the Net Zero 2050 target is still in force – and a legal requirement. Without improvements to the energy performance of buildings, there is very little chance that the UK will achieve this goal. Energy use reduction must support switching our electricity production from fossil fuels to renewables.
On the other hand, it’s important to remember that for many building developers and owners, MEES is just one factor in their decision to upgrade buildings. As SectorScope’s blog noted, lenders regard climate change as a critical risk in the built environment and focus more on measuring carbon as part of their loan agreements. Developers must show they are taking it into account to access funding for new or existing projects.
Time and again, in the construction and property sectors, clients have shown that they are leading the way, with many new projects in the office sector going well beyond energy and carbon requirements in the legislation.
Finally, as the SectorScope has highlighted in a previous report, the government is already exploring options for alternatives to EPCs. Industry experts have long-stated that EPCs provide a theoretical energy use figure, creating a ‘performance gap’ between a building as it’s designed and as it’s built. It would be better for the environment, building owners and tenants if a certification provided a more accurate indication of energy use. Hence the rising popularity of NABERS.
So if the delay to changes to the MEES for commercial buildings means there’s a better option than EPCs on the table, then it could be a positive development. If we’re simply looking at a delay to EPC upgrades for commercial PRS, then it’s fair to say that we could be looking at a chaotic few years in the property sector in the run-up to 2050.