In a detailed response to the Government’s Improving the energy performance of privately rented homes consultation, Paragon has recommended scrapping the hardline 2030 target requiring all rental properties to achieve at least an Energy Performance Certificate (EPC) rating of C. Instead, the bank advocates for a staggered timeline that would more realistically accommodate the sector’s operational realities.

Under Paragon’s proposed plan, new tenancies would need to meet the EPC C standard by 2030, extended tenancies by 2033, and all existing tenancies by 2035. This stands in contrast to the Department for Energy Security and Net Zero’s current proposal, which pushes for new tenancies to comply by 2028 and all tenancies by 2030—a timeline Paragon describes as overly ambitious and potentially damaging.

The lender warns that the Government’s accelerated schedule could unintentionally spark a landlord exodus. If property owners deem the expectations too onerous or financially unviable, many could exit the sector altogether. This could, in turn, shift the burden of energy upgrades to other housing tenures and worsen the already-strained rental housing market.

Beyond timing, Paragon raised alarm bells about the strained retrofit ecosystem. With the Government also pursuing the sizable goal of constructing 1.5 million new homes during this parliamentary term, the labour and supply chains needed for large-scale retrofitting may simply not be there.

The scale of the challenge is staggering. Nearly 60% of rental homes in England and Wales currently fall short of the EPC C benchmark, sitting at grade D or below. To meet the 2030 target, about 1.6 million properties would require upgrades each year—equivalent to retrofitting roughly 2,000 rental homes every single day. For the 2028 milestone, that figure jumps to a daunting 4,000 properties daily.

Insights from a Paragon survey conducted by Pegasus Insights reinforce these concerns. Of nearly 900 landlords polled, a mere 17% believe that achieving EPC compliance by 2030 is feasible.

Meanwhile, demand for rental homes shows no signs of slowing. Approximately 73% of landlords report continued strong tenant demand. Complementing this, Zoopla’s most recent rental market data indicates demand is currently 79% higher than pre-pandemic levels, while supply has dropped by 22%.

Louisa Sedgwick, Paragon Bank’s managing director of mortgages, emphasized the need for pragmatism: “We support the Government’s Net Zero target and understand the need for strengthening policy and regulation to drive climate action, but we would strongly urge that a longer term and more balanced approach is taken to allow the retrofit supply chain to grow.

“Increasing the delivery timeline and maintaining flexible exemptions allows for a smoother transition to EPC A to C in the PRS, without exacerbating the demand and supply imbalance, which is already expected to grow due to forecast population growth and demographic changes.”

In its consultation submission, Paragon also laid out several actionable recommendations aimed at easing the transition for landlords. Among them: a return to the original proposal of a £10,000 investment cap and a seven-year exemption period, alongside the reintroduction of incentive programmes such as the Warm Homes Grant.

Furthermore, Paragon urged the Government to ensure alignment between EPC reform and the broader Energy Performance of Buildings framework. Addressing the retrofit labour gap was another focal point, with calls for a comprehensive training initiative to upskill workers and build industry capacity. The bank also highlighted the uneven regional distribution of energy-inefficient homes, noting that properties in the North and Midlands disproportionately fall below EPC C compared to their southern counterparts.

Sedgwick closed with a cautionary note: “Rushed legislation could cause significant disruption to a PRS that will already be adapting to the new Renter’s Right Bill, forcing some landlords to sell because they cannot complete works in time.

“Adopting a more considered and realistic timeframe will give landlords more capacity to adapt their properties, allow the retrofit supply chain and labour force to grow and, ultimately, will be more beneficial for tenants.”