Energy Efficiency (Domestic Private Rented Property) (Scotland) Regulations 2026: partial BRIA

Section 1: Background, aims and options

Background to policy issue

The Scottish Government has legally committed to reach net zero by 2045 for the benefit of our environment, people, and prosperity. Progress has been made, and Scottish emissions reduced by 50% between 1990 and 2022, however, more must be done to ensure Scotland continues the transition to net zero.

Around 19% of Scotland’s total emissions come from the heating systems that are used in our building stock. This is the third largest cause of greenhouse gas emissions in Scotland. Reducing emissions from this sector is vital to reaching the Government’s ambition of reaching net zero. On 3 April 2025, the Minister for Climate Action confirmed in a statement to Parliament that the Scottish Government will bring forward a Heat in Buildings (HiBs) Bill to introduce a target to decarbonise heating systems in Scotland’s buildings by 2045^[1]. Alongside this, he committed to introducing MEES for domestic PRS properties using existing powers under the Energy Act 2011^[2]. These regulations are the subject of this BRIA.

Improving the energy efficiency of properties can support the transition to clean heat and support a reduction in emissions in the near term by reducing the energy required to heat a property. This means that a householder would need to turn the heating system on to a lower temperature or for shorter periods to reach the same ambient temperature. This supports reducing emissions when a polluting system is installed in the property, and 74% of PRS homes in Scotland currently use gas boilers and 7% use oil boilers^[3]. Reducing energy demand can also have a positive impact on reducing energy bills, as it makes a home easier and quicker to heat and keep warm.

The Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act sets statutory targets that by the end of 2040 no more than 5% of households will be in fuel poverty, no more than 1% of households will be in extreme fuel poverty and the median fuel poverty gap of households in fuel poverty is no more than £250 in 2015 prices before adding inflation. The first periodic report was published in April 2025^[4]. It is an important milestone in demonstrating the progress made over the last three years through the actions that were set out in the Fuel Poverty Strategy, but equally from taking actions not contained within the Strategy, which illustrates the cross-cutting nature of fuel poverty and the changing context to which the Scottish Government has had to respond to since publication in 2021. Improving the poor energy efficiency of the home is the sole fuel poverty driver within the devolved competence of the Scottish Government to take action.

Therefore, improvements in the energy efficiency of buildings can not only make a contribution to national climate change targets and in preparing for the clean heat transition, but importantly will also support aims to fuel poverty and ensure a just transition to net zero.

Existing legislative requirements

There are currently no MEES for PRS properties in Scotland. This means landlords can rent properties that meet any EPC banding.

There are a number of existing legislative requirements that landlords must comply with before letting a property in Scotland, such as the Repairing Standard, and UK-wide existing energy efficiency regulations include UK product standards, which are reserved. The UK regulations manage the efficiency standards of individual products, for example, when boilers reach the end of their lifetime their replacement has to meet the required level of energy efficiency. These types of upgrades however would be insufficient to bring most properties up to EPC band C.

Since 2014, energy efficiency standards have been in place for the social housing sector through the Energy Efficiency Standard for Social Housing (EESSH). Its primary aim was to encourage social landlords to improve the energy efficiency of the social housing stock in Scotland.

The first EESSH milestone required social landlords to meet an energy efficiency rating equivalent to EPC band C and D (Energy Efficiency rating) by 2020. The standard was designed to reduce energy consumption in order to reduce fuel poverty and emission of greenhouse gases. In 2018-19 the standard was reviewed and a new milestone was set known as EESSH2 and required that all social housing meets, or could be treated as meeting, EPC band B, or is as energy efficient as practically possible, by the end of December 2032 and within the limits of cost, technology and necessary consent. In addition, no social housing below EPC band D should be re-let from December 2025, subject to temporary specified exemptions.

The proportion of social rented properties that currently have a good level of energy efficiency (defined as EPC band C) have increased from 53% in 2016 to 69% in 2023. The distribution of domestic properties in EPC band C or better for social housing in 2023 is higher than the PRS at 52%. These differences could be driven by the Scottish Housing Quality Standard (SHQS)^[5] and the Energy Efficiency Standard for Social Housing (EESSH)^[6] which introduced MEES for the social sector.

The UK Government introduced MEES for domestic PRS properties across England and Wales in 2015. This set a requirement for properties to reach EPC band E. Earlier this year, UKG sought views on proposals to amend the existing regulations to require properties to achieve EPC band C before being let. The standard would apply to ‘new tenancies’ from 2028 with ‘all tenancies’ then required to meet the higher standard by 2030. Their consultation closed on 2 May 2025.

EPC Reform

The Scottish Government is reforming EPCs so that they have a clearer focus on the energy efficiency of the building fabric and give better information on the emissions and efficiency of the heating system. Our 2023 EPC Reform consultation^[7] set out our proposals and we published our response in January this year^[8]. We will lay new EPC regulations in autumn 2025 and intend to bring them into force during autumn 2026, though this will depend on the UK Government’s timetable for the development of the HEM.

EPC reform will introduce a new HRR which we intend to use as the basis for MEES in the PRS. This rating will focus on the fabric of the building and will reflect how well it retains heat to maintain a comfortable internal temperature, so it would not be affected by changes to the heating system. Alongside this rating, the EPC would also show the efficiency and running costs of the home’s heating system, and the cost of energy to run the home to standardised conditions.

In parallel to the PRS MEES consultation, the Scottish Government is also consulting on the scope of a potential Heat and Energy Efficiency Technical Suitability Assessment (HEETSA)^[9]. This bespoke, technical assessment would be a step beyond the standardised, modelled EPC assessment and could be used to support building owners in understanding which potential energy efficiency improvement measures would be technically suitable (and which would not).

The Scottish Government has listened to stakeholder feedback which expressed concern at potential risks of things like dampness, condensation or mould if energy efficiency measures were recommended which would not be appropriate for a building. This proposed technical suitability assessment would provide an additional level of safeguard for consumers, particularly those in more complex to decarbonise buildings such as traditional or protected buildings, those in rural areas, or tenements.

Previous policy proposals

Improving the energy efficiency of buildings is a key driver to reducing heat demand and has been a priority for Scottish Ministers for over a decade, firstly designating energy efficiency as a national infrastructure priority in 2015^[10]. This was the first long-term commitment to reduce the energy demand and decarbonise the heat supply of our residential, services and industrial sectors. This commitment was then brought forward in Scotland’s Energy Strategy^[11] in 2017 and consulted on as part of our Energy Efficient Scotland^[12] consultation in 2018.

This was followed by the development of the draft Energy Efficiency (Domestic Private Rented Property) (Scotland) Regulations which were consulted on in 2019 and then laid before Scottish Parliament in 2020^[13]. These regulations were passed through the Scottish Parliament with no objection before being withdrawn due to the impact of the Covid pandemic on the sector. At the time of withdrawal the Scottish Government made clear it would look to bring these regulations forward at a later date.

The public consultation on proposals for a HiBs Bill^[14] also included proposals relating to a MEES for the domestic PRS. The consultation set out that, in order to improve the energy efficiency performance of Scotland’s housing stock, the Government was proposing that a MEES should be met by private landlords before the end of 2028.

In the consultation, the Government proposed that the MEES could either be met by installing measures from a list of energy efficiency measures or by meeting a minimum standard of the fabric efficiency of the reformed EPCs (now called the Heat Retention Rating).

Following the HiBs Bill consultation, we are now consulting on this updated proposal to introduce PRS MEES from 2028 for new tenancies and by 2033 for all properties.

Rationale for proposed regulations

The PRS is being prioritised for action for the following reasons.

Standard of the Stock

As of 31st March 2022, there were around 2.5 million dwellings in Scotland. Of these, 61% were owner-occupied, 4% were vacant or second homes, 23% were social rented properties and 13% were privately rented or lived in rent-free ^[15]. This means there are around 300,000 privately rented homes; 64% of which are flats and 36% houses.

EPC bandings of PRS properties has been improving over time. The graph in figure 1 below shows how bandings have improved between 2017 and 2023.

This means that some landlords have been taking action to improve their properties voluntarily, either by installing energy efficiency measures or installing more efficient boilers. 52% of PRS properties are already EPC band C or above (or around 156,000 properties).

However, this still leaves approximately 144,000 PRS homes (48%) that are able to take action to improve their property to be closer to reaching a good level of energy efficiency. The PRS has the highest proportion of the lowest energy efficient properties in Scotland. 34% of properties are EPC band D and 14% of the stock is rated EPC band E/F/G.

Dwellings in the lowest energy efficiency bands (F and G) are more likely to be older pre-1919 dwellings and 37% of PRS dwellings were built before 1919. This means that some properties will not be able to reach EPC band C, but will still be able to make some level of improvement that will provide benefit for tenants.

We estimate that around half of PRS properties will be able to install measures to reach EPC band C or higher, and that all PRS properties will be able to install measures to make improvements even where those properties cannot reach EPC band C or above.

Fuel Poverty

It is also the case that a higher proportion of dwellings in the PRS are estimated to be in fuel poverty (44%) than in the owner occupied sector (21%).

Fuel poverty is affected by a number of factors, including household income, the price of fuel, and energy demand of the dwelling (and the associated energy efficiency). The running cost of the heating system is therefore important, however legislative levers to amend the electricity and gas prices are reserved to the UK Government. The Scottish Government can make changes to required energy efficiency levels.

For both fuel poor and extreme fuel poor households, the lowest rates of fuel poverty are associated with higher energy efficiency standards. 32% of households living in dwellings rated EPC band C or better were fuel poor, compared to 48% living in dwellings in bands F or G.

Emissions reduction potential

PRS dwellings have higher overall modelled carbon emissions that other tenure types. In 2023, the highest emissions were observed for PRS dwellings (77 kg/m2 ) and lowest for housing association dwellings (61 kg/m2 ).

Misaligned Incentives

There is a misalignment of incentives (market failure) impacting the potential for voluntary improvement to PRS homes. Landlords are generally responsible for making energy efficiency improvements while the tenant benefits from any reduction in energy demand, bills and improved health. This may be one reason why almost half of PRS homes remain lower than EPC band C.

This issue could be mitigated if a landlord is able to recoup some of their cost through increased rent. This ability was constrained for a period as a result of the emergency rent controls which were introduced in September 2022^[16], and subsequent transitional measures. However there does not appear to be a strong correlation between rent controls and PRS properties being upgraded over time (Figure 3 below).

Figure 3 – SAP 2012 - PRS

The Scottish Parliament is currently considering the Housing (Scotland) Bill, which contains a package of reforms that will help ensure people have a safe, secure, and affordable place to live. This includes plans for long-term rent controls, which would apply a cap to rent increases both during and between tenancies in areas where rent controls were in place. As part of our consideration of these issues, the Scottish Government is currently seeking views on whether landlords in rent control areas should be allowed to increase rent by more than the rent cap where certain types of improvements have been undertaken, such as energy efficiency improvements^[17].

Current funding available from relevant programmes also mitigates the misalignment of incentives barrier to an extent. There is existing Scottish Government support for landlords to improve the energy efficiency of their properties through the PRS Landlord Loan Scheme. The maximum funding available per property is limited to £38,500. Landlords with up to five properties in their rental portfolio can borrow a maximum of £100,000 with 0% interest. Landlords with more than five properties in their rental portfolio can borrow a maximum of £250,000 and will be subject to interest at a rate of 3.5% APR. It covers improvements like insulation, home renewable systems such as heat pumps, and even connections to approved district heating schemes.

The scheme is demand-led and has supported over 250 landlords since its inception in 2020, having paid out over £1.5 million for energy efficiency measures and clean heating/renewable systems.

However, almost half of PRS homes continue to be rated lower than EPC band C, which has been determined as a good level of energy efficiency. The available schemes and support have not provided sufficient incentive for most landlords to improve their property to EPC band C.

Despite this potential mitigation through increased rents and government funding, there remains properties that are in the lowest EPC bandings in the PRS.

Effect of business as usual

Business as usual in the PRS has not resulted in sufficient improvement in homes so that they all reach a minimum of EPC HRR band C, which was set out as a good level of energy efficiency in the HiBs Strategy^[18]. As it stands, landlords are not required to meet a MEES and many have not taken action to improve their properties to this level. Despite improvements in EPC bandings in the PRS over time, there remains 48% of properties at EPC band D or below. As set out above, the reformed EPCs will introduce a new Heat Retention Rating focused on the fabric of the building as well as showing the efficiency and running costs of its heating system, and the cost of energy to run the home to standardised conditions. Under business as usual, there would be no requirement to focus on improving the fabric efficiency of the building against the HRR.

We believe setting a minimum standard in the PRS, which focuses on the HRR, will ensure that PRS properties are upgraded, emissions begin to reduce and tenants benefit from homes with better fabric.

Purpose and aim of action

Intended outcome

The outcome of introducing PRS MEES is for all properties, as far as possible, in the domestic PRS to meet an EPC HRR band C, unless exempt, by 2033.

Aims and objectives

Introducing a PRS MEES would support Scottish Government aims and objectives. The introduction of the PRS MEES is intended to directly support two of the four Government priorities: tackling the climate emergency and supporting our fuel poverty aims. To a lesser extent PRS MEES will also support our aims of economic growth and having sustainable public services.

Upgrading the fabric of a home (e.g. installing insulation) can help to reduce energy demand and thus emissions and potentially bills (depending on householder behaviour), supporting fuel poverty reduction. While full decarbonisation of heating systems will be required to reach net zero, analysis has suggested that all PRS homes installing certain measures could reduce emissions in PRS dwellings, across the sector as a whole, by around 5%.

Reducing demand has the potential to reduce householder bills as the home reaches a certain temperature more easily. A higher proportion of dwellings in the PRS are estimated to be in fuel poverty (44%) than in the owner occupied sector (21%).

Improvements to energy efficiency also mean that buildings are easier to heat and stay warmer for longer, improving health for those in the home, with potential savings for public health spending.

We envisage that the following benefits could be achieved through the improvement of energy efficiency levels within the domestic PRS:

• improved fabric efficiency of a home, helping to reduce energy demand and potentially positively impacting fuel poverty and carbon emissions;
• Benefits for the economy and supply chain – the Green Heat Taskforce Report Part 2^[19] (GHFT part 2) confirms that there are likely to be direct benefits of energy efficiency policy for Gross Value Added (GVA) and jobs. There is likely to be increased work for related businesses, e.g. on advising on or installing retrofit measures, as well as for the wider supply chain if a MEES is introduced;
• Deliver health, wellbeing and early years improvements through warmer homes;
• Reduce public health spending by improving tenant health if, as intended, these regulations lead to a reduction in fuel poverty and warmer homes. GHFT Part 2 notes that the cost-benefit analyses of the return on investment that could accrue from preventing fuel poverty amongst children and young people suggest that, for every £1 spent on reducing fuel poverty, a return in NHS savings of 12 pence can be expected from children’s health gains. When adults in the family are also included, this increases to 42 pence. Furthermore, common illnesses caused by cold homes during the winter currently cost the NHS around £1.4 billion every year. By improving energy efficiency in homes, not only can energy bills be reduced, but the financial strain on the NHS can also be alleviated by preventing cold-related health issues.

Options

We have considered two options in detail for the purposes of the BRIA:

1) Do nothing, and

2) Introduce PRS MEES regulations using powers conferred in the Energy Act 2011.

1. Do nothing

The do-nothing, or business-as-usual option, refers to what will happen in the absence of the introduction of minimum standards of energy efficiency in the domestic PRS. This option would not require landlords to take action but in order to achieve a reduction in energy costs and increase in energy efficiency, would rely on government incentivised or voluntary action to improve the energy efficiency of their properties.

As noted above, there are misaligned incentives that are not being adequately mitigated by the business as usual approach to incentivise all landlords to improve their properties, as far as possible, to reach EPC HRR band C.

Business as usual has resulted in properties not being improved to an adequate level and tenants continuing to live in colder and harder, more expensive to heat homes that are worse for their health.

2. Introduce a MEES for the domestic PRS

This option would involve introducing MEES within the domestic PRS. The proposed regulations would prohibit the letting of properties which fall below the minimum standard of energy efficiency until the landlord has made any relevant energy efficiency improvements that apply to the property.

The proposal is designed to tackle the least energy-efficient properties in Scotland, using reformed EPCs as the measure for this standard. This means that the standard will be for the landlord to install certain energy efficiency measures to meet the new EPC HRR band C, before letting the property.

We are proposing for implementation to be phased and intend for regulations to apply to new tenancies (when being let to a new tenant) from 2028 and to all privately rented homes by the end of 2033.

To provide flexibility and accommodate individual circumstances, the proposals set out exemptions which will be available to landlords. These exemptions relate to consent; negative impacts on fabric or structure of property; cost cap; and temporary exemptions.

We are proposing that Local Authorities will carry out enforcement and compliance duties. Powers to gather information to support the work being undertaken by Local Authorities may be done through the serving of a Compliance notice. As the enforcement authority, Local Authorities would have powers to serve a penalty notice for individual acts of non-compliance. This can include financial penalties, a publication penalty or both. Such penalty notices can be the subject of an appeals process.

This option will result in improvements to the fabric of PRS homes, accelerating emissions reduction, supporting the transition to clean heat and supporting our aims to reduce fuel poverty.

Sectors and groups affected

Landlords

Landlords will be most significantly and directly impacted by this proposal. They will be responsible for upgrading their properties to meet the new standards (or demonstrate that they are exempt) before a property can be let. This is not specific to different regions or areas of Scotland. We do not yet have an estimate of how many landlords will be affected as many already own properties that meet the standard, and there may be landlords with a portfolio of multiple properties that do not meet the standard. The number of registered landlords recorded in March 2025 was 236,478.^[20] As noted above, we estimate that approximately 144,000 PRS homes (48%) are able to take action to improve their property to be closer to reaching a good level of energy efficiency, which suggests up to a maximum of 104,000 landlords (48% of the current number of registered landlords) may need to take some action.

Tenants

The proposal will also directly impact individuals living in and renting PRS homes. Depending on the extent of works required, they will potentially be required to vacate the property to allow works to be completed, and then will benefit from those improvements by living in warmer and healthier homes^[21].

Supply chain

The supply chain relating to energy efficiency improvement measures and managing rental properties will also be impacted. This includes letting agencies, EPC assessors, installers, training providers and others. These bodies and individuals will be responsible for helping landlords meet the new standard.

Local authorities

We are proposing that local authorities will be the bodies with responsibility for enforcing these regulations. This means they will be required to manage the process to understand which properties are non-compliant and issue relevant penalties.