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

Section 3: Costs, impacts and benefits

Quantified costs to businesses

Landlords will be responsible for the majority of the costs created by these regulations. These costs will include the costs of energy efficiency measures themselves and costs of compliance such as an updated EPC and administration costs to provide evidence for any exemptions (such as quotes from installers).

We have provided below an estimate of average costs for properties currently under EPC band C who install some or all measures from a shortlist of common energy efficiency measures. We have provided two figures, for illustration. The first is an average cost of £1,400, where the measures include suspended floor insulation; loft insulation; cavity wall insulation; and draught proofing (external doors). This list is drawn from the ‘list of measures’ that where included in previous proposals as part of our HiBs Bill consultation. The second average cost is the list as above, with double glazing (replacing single glazing) added, providing an average cost of £2,700.

These figures will be updated to reflect the new HEM for the final BRIA, to be published alongside the regulations.

We intend for the maximum cost for any individual property to be subject to a cost cap of £10,000. This is consistent with the level of cost cap proposed for the Draft 2020 regulations, which provided a cumulative cost cap of £10,000. We are commissioning further analysis to understand how different homes perform in the current cost-based rating and the new HRR. This analysis will be used to inform our policy development and the finalisation of a suitable cost cap for these regulations.

All the ‘actual costs’ incurred in relation to carrying out improvement works will be included in the cost cap. This includes the costs of obtaining a new EPC and any works carried out in the preceding 12 month period.

It is our intention that landlords will be able to apply for a Scottish Government loan to help cover the costs through the PRS Landlord Loan Scheme. Currently, loans of up to £38,500 per property are available, with up to £15,000 available for energy efficiency measures (the wider loan can also cover the cost of installing measures such as clean heating systems including heat pumps and energy storage systems). Through consultation, we are seeking to review the support provided by the scheme.

We will seek to understand any other financial or resource costs during our stakeholder engagement.

Other impacts

Sanctions for breaching the regulations (for properties that do not meet minimum standards for energy efficiency) will be applied per property and per breach. If landlords are seeking an exemption these will be by individual property. Therefore the regulations will not differentially impact landlords of different sizes.

Scottish firms’ international competitiveness

As these regulations relate to homes located in Scotland, we do not expect these regulations to affect international competitiveness.

Benefits to business

For landlords, these regulations will improve the standard of their property and has the potential to increase their value.

For wider businesses, these regulations will provide greater certainty to the businesses and wider supply chain involved in making homes more energy efficient and increase the market for their services above and beyond the business as usual approach.

As noted above, the GHFT Report Part 2 notes that there are direct benefits to GVA and jobs impact from retrofitting buildings to improve energy efficiency. Most obviously, there is the work for businesses advising on or installing retrofit measures, with these businesses then creating and/or maintaining jobs. As many of the firms involved are SMEs, and because action is needed for properties right across Scotland, these direct benefits will tend to be distributed at a local level.

As part of our engagement during the HiBs Bill, we will engage with suppliers and the supply chain to further understand these benefits and include that information in the final BRIA.

Small business impacts

We will seek views during our stakeholder engagement on where there could be specifically different impacts for small businesses as opposed to larger ones. For example, we recognise that landlords with smaller numbers of properties may have a lower capacity to absorb any additional administration costs associated with these regulations, including compliance requirements. We will work with others, including landlord associations and colleagues leading on EPC reform and landlord funding, to ensure there is clear guidance and, where possible, simplified processes to ensure that there is not a disproportionate administrative burden. We will set out further details of this in the final BRIA.

Investment

In terms of investment, we expect that the main impact will be to increase certainty for the businesses and supply chain involved in energy efficiency improvements to homes. This certainty will help provide assurance for these businesses to invest more in their firms and to attract wider investment in the supply chain.

We will discuss investment impacts as part of our engagement and this will be included in the final BRIA.

Workforce and Fair Work

We are not aware of any impacts on the workforce or Fair Work but will discuss this with stakeholders as part of our engagement ahead of the final BRIA.

Climate change and circular economy

These regulations will contribute to reducing emissions and support the Scottish Government’s climate objectives by improving the fabric efficiency and heat retention of homes in the PRS.

As set out above, analysis has suggested that all PRS homes installing certain energy efficiency measures that could contribute to reaching EPC band C could reduce emissions in PRS dwellings by around 5%. When the new HEM for EPCs is finalised, we will look to provide updated and more accurate information on the level of emissions reductions that could be achieved from meeting EPC band C across the PRS.

Competition Assessment

We do not consider the competition impacts to have changed since the BRIA for the 2020 regulations. This set out that:

Impact on landlords

The proposed regulations will set a minimum standard of energy efficiency in the sector for all landlords in the private rented sector. While the main impact of the regulations will fall on the sub-set of dwellings which are below the required level, this will only be to bring them more in line with the energy efficiency of other properties in the sector.

For each dwelling in their portfolio which falls below the required standard, the landlord will be liable for the costs of upgrading it, as well as a post-EPC report to demonstrate compliance. These costs vary in proportion with the number of dwellings in the landlord’s portfolio. Since they are not fixed costs which can be spread over a number of dwellings, they do not give larger landlords an advantage.

Larger landlords who are upgrading a portfolio of dwellings may have some advantages due to economies of scale, such as being able to negotiate a better price per unit from an assessor/installer. However, to the extent that such economies of scale exist, they are part of the normal operation of the market and are not in themselves the result of the proposed regulations.

The regulations may discourage some “accidental landlords”, e.g. people who temporarily rent out their former home before selling it, if they see minimum standards as too onerous. However, it is important that any prospective landlord is prepared to meet the professional standards required by tenants.

Minimum standards will make things fairer, ensuring that all tenants in the private rented sector are guaranteed a minimum level of energy efficiency. By giving prospective tenants greater confidence in the quality of the offer provided by the private rented sector, the regulations may help make the sector more attractive, potentially boosting demand and creating opportunities for good landlords to enter the sector.

Impact on assessor and installers

The regulations may create more demand for assessors and installers. Since the impact on these suppliers will be positive, no adverse impact on competition in the installer/assessor market is anticipated. On the contrary, regulation could give suppliers greater confidence that there will be demand for their services, supporting investment in these markets, including by new entrants, and increasing competition. The questions required by the competition assessment are as follows:

• Will the measure directly or indirectly limit the number or range of suppliers?
• Will the measure limit the ability of suppliers to compete?
• Will the measure limit suppliers’ incentives to compete vigorously?
• Will the measure limit the choices and information available to consumers?

For the reasons set out above, our view is that the answer to all of these questions for landlords, assessors and installers is “no”.’

Consumer Duty

The consumers most likely to be affected by these regulations are tenants in the domestic PRS. It is expected that tenants will benefit overall from these regulations by improvement in fabric efficiency in the homes they rent, thereby reducing energy bills and providing better quality, warmer homes in the PRS. Without introducing regulations, we would not expect as many landlords to take these steps to improve energy efficiency.

There is the potential impact that landlords could increase rent that would offset any cost benefit of improved energy efficiency. The Scottish Government are currently consulting on potential rent control exemptions and we will use this to inform our final regulations^[23]. There is also potential disruption to tenants where landlords install energy efficiency measures while there are tenants in situ.

We will engage with stakeholders more fully on any further possible impacts on consumers and include this in the final BRIA.