We need to improve the quality, not just quantity of rental homes  

Housebuilding targets have rarely left the headlines over the last few weeks. Following the abandonment of compulsory targets, local authorities are slowing down on plans to build new homes. In Manchester, some town halls are already considering pulling out of the city’s masterplan, Places for Everyone. Major housebuilders are pausing or delaying new developments amidst an uncertain housing market.  

Frequently missed from these conversations is the pressing need to make improvements to existing homes. More than 80% of 2050’s housing stock is already standing, so fixing the housing crisis doesn’t mean simply driving up new supply but improving the quality of what we already have.   

As it stands, nearly all of England’s existing 24.7 million homes require some form of retrofit. Nowhere is this more apparent than in the private rented sector. While the energy efficiency of our housing stock is on an upward trajectory, private rentals have the lowest EPC ratings of all tenures, with 67% currently below EPC C.  

The winter energy crisis has laid bare the urgent need for energy efficiency improvements. Renters are losing out financially and thermally, despite more than £18bn being spent on Energy Price Guarantees. Research published this January suggests that requiring privately rented homes to meet an EPC C rating would save residents an average of £570 a year on their energy bills. 

These upgrades are also crucial for health and well-being. Well-insulated, well-ventilated homes not only keep their residents warm but reduce the likelihood of physical health complications such as asthma. Poor quality, energy inefficient homes also have serious implications for the mental health of residents.

When it comes to health, private rental homes often fall short here, too. An alarming one in 10 privately rented homes suffers from dampness, compared with only 2% of homes that are owner occupied, according to the most recent English Housing Survey. These issues have a huge material impact. Poor quality housing costs the NHS an estimated £1.4bn a year, with excess cold the main culprit.   

According to Savills, £330bn is needed to retrofit the private rented sector in line with 2035 energy efficiency targets. Despite recent retrofitting commitments, limited resources mean that relying on government efforts alone could mean too little, too late.

As a shortage of available homes drives up rental costs, getting renters to fit the bill is simply not an option. Luckily, the private rented sector is an attractive option for institutional investors like pension funds and insurers. People will always need somewhere to live, so rental homes offer investors a reliable alternative to fixed-income assets, providing long-term income streams with inflation-hedging and counter-cyclical qualities.  

Retrofitting these homes – as we plan to do for all 3,000 homes within our upcoming UK portfolio, targeting a minimum EPC C rating where possible – helps investors to meet their ESG criteria.   

Almost uniquely in Europe, the UK’s private rental market is currently dominated by non-professional landlords, who are unable to deliver refurbished housing stock at the scale required. By aggregating individual, geographically dispersed homes into large-scale portfolios on behalf of institutional investors, we are helping professionalise the private rented sector.  

With the right incentives, harnessing institutional investment can encourage a move away from simply delivering new homes, to ensuring that the millions of rental homes we already have across the country are of high quality.

While initiatives like the Future Homes Standard are important, we need to do much more to upgrade the homes we already have. By improving our existing housing stock, we can move away from the cold, damp and draughty homes that have long defined private renting, and towards the environmentally friendly, healthy housing that consumers want and deserve.