Sancus: Time for a refurb?

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Time for a refurb?

Preparing for changes to EPC rules

Jaxon Stevens Head of Sales South Sancus

Mel Fourie Head of Sales North Sancus

Earlier this year, following many conversations with our brokers and borrowers, we launched “Refurb by Sancus”, offering a highly adaptable refurbishment product to the market. We were seeing a surge in demand for refurbishment loans as developers and property owners prepare for coming government directives. These are aimed at supporting future sustainability through the reduction of properties’ carbon footprints. These new EPC (Energy Performance Certificate) rules will come into force in 2025 and are already driving both purchasers of new investment properties and established landlords to make changes to ensure they fall within the new government guidelines.

A property is given an EPC rating when the property is constructed, sold, or let to show how much energy it uses, how environmentally friendly it is and how much energy bills will be expected to cost. Upgrading a property to an acceptable ‘C’ rating, could cost the property owner tens of thousands of pounds, hence the demand for our refurbishment product and lending expertise in this area. The new legislation will require properties to have an EPC rating of ‘C’ or higher. Currently, two thirds of the private rented sector are known to have an EPC rating of ‘D’ or lower which equates to 2.3 million properties across the UK. Fines of up to £30,000 can be expected from 2025 (Lettingaproperty.com “EPC Certificates for Landlords 2022: EPC”) under the new legislation with the added complication that it may also become harder for owners or buyers to raise finance against these assets.

We are also seeing an increase in demand for both refurbishment and development loans brought about by the extreme shortage of available housing stock which is very much in the news. The government is now targeting the creation of 300,000 new dwellings a year by the mid-2020s, however, already 2020/21 fell short, at just over 216,000, leaving a shortfall of 84,000 properties in that period alone (House of Commons Library Research Briefing “Tackling the under-supply of housing in England”).

Estimates also show there were 238,306 wasted long-term empty homes in 2021 (Action on Empty Homes), properties that could be used to support the national housing shortage. Through retaining the existing structure, refurbishment requires less materials and therefore less embodied carbon (the carbon footprint of a material) which, depending on the build, could show a significant saving in annual operational carbon emissions for the project (Circular Ecology “The Environmental Sustainability of Existing Buildings: Refurbish or Replace”).

There has also been an increase in residential refurbishment and conversion enquiries, including varying property schemes, some encompassing retail or office space conversions to residential as well as increase in HMOs (House in Multiple Occupation). This creates a greater number of opportunities for people to be able to access more affordable

“Currently, two thirds of the private rented sector are known to have an EPC rating of ‘D’ or lower which equates to 2.3 million properties across the UK

housing. There has also been an increase in single use residential properties being converted into multiple self-contained living spaces.

Recent relaxing of planning rules, including changes to ‘Permitted Development Rights’ allow certain building works and changes of use to be carried out without having to make a formal planning application (Ministry of Housing, Communities and Local Government – Permitted Development Rights for Householders).

Examples include:

• Household improvements, including internal remodelling, converting a garage, loft conversions and one or two storey extensions;

• Class E conversions – The ability to change the shape of the high street, encouraging conversions between common uses for high street buildings, such as financial and professional service properties into cafes or restaurants. More recently this has further changed to allow buildings to be converted to residential use under permitted development. There are a few restrictions, such as the site must have been vacant for three months, it must have been in commercial use for two years beforehand and under 1,500 meters squared;

• Agricultural buildings – Prime source of opportunity as many are under used or abandoned entirely with real value to be added by converting to residential.

The combination of EPC rule changes, cost of living increases, shortages in housing stock and the changing shape of the high street with the underlying drive of sustainability have all been behind the launch of “Refurb by Sancus”. Sancus offers a higher day one leverage and 100% of refurbishment costs to enable investors and developers to access more property opportunities faster, in an ever-changing market. By having 100% of the refurbishment cost funded it allows a better standard of finish and quicker access to market whether being let or sold, helping investors to recycle their cash more effectively before moving on to their next project.

For more information or to speak with a member of the team please email contact@sancus.com

“Upgrading a property to an acceptable ‘C’ rating, could cost the property owner tens of thousands of pounds, hence the demand for our refurbishment product and lending expertise in this area