Why upgrading your rental property is a smart long-term investment
Making your rental property more energy-efficient can bring you a host of benefits, and thanks to various government supports, it's easier than ever to get started.
Do You Own a Rental Property?
Ireland has around 2 million homes, with over 330,000 of these being private rentals. A significant portion of the rental market consists of older properties that are more expensive to heat due to poor insulation and old inefficient heating systems.
If you own a rental property, especially an older one, you might be wondering if upgrading its energy efficiency is worth the effort and cost. It's a fair question, especially if your tenants are the ones paying the energy bills. But here's the thing: making your property more energy-efficient can bring you a host of benefits, and thanks to various government supports, it's easier than ever to get started.
Landlords in Ireland
Most landlords in Ireland own just one or two rental properties and often face tight budgets and limited rental income. In 2021, the net rental income of 80% of landlords was less than €20,000, and approximately 60% of individual landlords had a gross income from all sources of under €60,000. For these landlords, every euro counts, and making smart investments is crucial.
On the other hand, a small number of large landlords own a significant portion of rental properties. These landlords might have more resources, but they also have a larger portfolio and sinking fund to manage and maintain.
Regardless of the scale, the challenge of addressing energy efficiency in the private rental sector is growing with more households likely to remain in rented accommodation throughout their lifecycle. The ESRI report highlights a growing share of housing stock being in rented accommodation, with owner-occupier status decreasing from 82% in 1991 to 70% in 2022. This means that more families are relying on rental properties as their long-term homes.
The benefits
Increased income.
Imagine upgrading your rental property into a warm and modern home. Not only does this make your property more attractive to potential tenants, but it also increases its value. For each one-grade improvement along the 15-point Building Energy Rating Scale, research shows that prospective tenants are willing to pay an additional average of €38 per month and your property's value is boosted by about 1.3%. It's like giving your investment a facelift that pays off in the long run.
Lower interest rates
Don’t forget the other financial benefits: Many banks now offer 'green mortgages' for properties with better BERs. These mortgages come with lower interest rates, typically a 0.3% discount. Over the life of your mortgage, this can add up to significant savings. It's a smart way to reduce costs while enhancing your property's appeal.
Happy tenants
Happy tenants are long-term tenants. By investing in energy efficiency, you create a warmer, cosier, and healthier home. Most upgrades can be done with minimal disruption, so your tenants can stay in-situ while you improve their living conditions. This means fewer vacancies and more stable rental income.
Improved health and well-being
Energy upgrades improve the health and well-being of your tenants. Studies have shown that energy-efficient homes can significantly improve the general health of people. Lower energy bills can improve their financial security, improving the tenants' ability to pay rent and enhancing their overall welfare.
Better for the planet
Reducing your property's energy demand with insulation and heating controls and adding renewable energy sources like a heat pump and solar panels helps lower greenhouse gas emissions. It's a win-win for you and the planet.
Government supports
The Irish government offers several supports to help landlords with the cost of retrofitting. These include generous grants, tax incentives and low-cost loans, making it easier to take the first step, whether it's insulating your walls or installing solar panels. Upgrades like attic and cavity wall insulation can be carried out with minimal cost and disruption and will make a big impact on your property's energy efficiency as well as your tenants' comfort.
To get the most out of your investment, take a closer look at your property’s BER certificate and the accompanying advisory report. This will give you a clear picture of your property's current energy performance and a list of recommended energy upgrades to improve it. The Advisory Report categorises these upgrades by cost and impact and can help to prioritise the most cost-effective upgrades. To access your current BER certificate and Advisory report, please visit our national BER database.
Housing for All plan
It makes sense to start thinking about energy upgrades sooner rather than later. The Government’s Housing for All Plan commits to the introduction of a minimum BER for private rental properties. Current building regulations also state that where a dwelling undergoes major renovation, the energy performance of the building must be upgraded to meet a cost optimal (B2 BER) in so far as this is technically, functionally, and economically feasible. By planning ahead, you can ensure that your property meets future standards and avoid potential disruptions and additional costs down the line.
The ESRI recently estimated that an investment of €8 billion is needed to retrofit the rental sector, highlighting the need for significant investment and a range of funding supports to suit different property owners. Everyone needs to play their part to achieve these targets, and with the range of government supports available, undertaking energy upgrades is now an affordable and smart choice for landlords. By improving the energy efficiency of rental properties, we can enhance warmth and well-being in homes across Ireland, as well as helping to reduce our carbon footprint.
