Ban on Indexation of Homes with Low EPC: Impact on Landlords, Tenants, and Buyers

The Flemish government has announced a new measure that is set to shake up the real estate market. Starting in 2028, landlords of properties with a poor energy label—specifically EPC label E or F—will no longer be allowed to index their rental prices.

This initiative, led by Flemish Minister of Housing Melissa Depraetere (Vooruit), aims to encourage landlords to make their properties more energy-efficient. But what will be the consequences for landlords, buyers, and the real estate market?

Why This Measure?

Energy efficiency is becoming an increasingly important focus in the real estate sector. Homes with a low EPC score not only lead to higher energy costs for tenants but also have a greater environmental impact.
Currently, Flanders has approximately 1.15 million homes with an EPC label of E or F, representing one-third of the total housing stock.

With the ban on indexation, the Flemish government aims to send a clear message: energy-inefficient homes are no longer acceptable. Landlords are encouraged to invest in renovations that improve the energy performance of their properties.

What Does This Mean for Landlords?

While this measure puts pressure on landlords, the government is offering support to assist them with renovations. Initiatives include:

Renovation Guidance: Professional assistance for renovation projects
Group Purchases: Collective procurement of materials and services to reduce costs
Pre-financing: Financial support to make renovations feasible without incurring immediate high expenses.

In addition, the conformity certificate, which ensures the quality of rental properties, will be further implemented across Flanders. This means landlords will increasingly need to demonstrate that their properties meet minimum quality standards.
By 2030, properties with an EPC label of E or F will no longer be permitted for rental.

Effects on the Real Estate Market

The renovation obligation and the ban on indexation are already impacting property prices:

Well-insulated homes are becoming more expensive. According to figures from Notaris.be, the median price of a home with an EPC label A is currently €389,450, significantly higher than homes with poorer labels.
Poorly insulated homes are decreasing in value. Homes with an F label are sold for an average price of €240,640, which is substantially lower.

This trend creates opportunities for buyers willing to invest in renovations. However, landlords of poorly insulated properties will need to account for additional renovation costs or reduced rental income in the long term.

Additional effects of the new measure and the broader implications

In addition to the direct impact on rental prices and renovation obligations, the new regulations are likely to have several indirect but significant effects on the real estate market. Below, we discuss some additional scenarios that could reshape the landscape of rental and owner-occupied housing.

Increase in the Number of Homes for Sale

Not every landlord is willing or able to carry out the necessary renovations. The costs of measures such as insulation, replacing windows, or installing a more efficient heating system can be significant. As a result, some landlords may choose to sell their properties rather than invest in renovations. This will lead to an increased supply of homes on the market, particularly poorly insulated properties. Consequently, the prices of these homes will decline further, creating opportunities for buyers with renovation budgets.

Reduction in Rental Market Supply – Higher Rental Prices

When landlords decide to sell their properties, the availability of rental homes decreases. This could result in an increase in rental prices, particularly for energy-efficient properties. In popular areas, such as urban centers and locations near employment hubs, tenants may be forced to pay higher prices for energy-efficient homes or settle for less suitable alternatives.

Shift in the Profile of Real Estate Investors

The new regulations will make real estate less appealing to small landlords or investors without a long-term strategy. Larger players with sufficient financial resources to fund renovations, such as real estate funds and professional landlords, are likely to become more dominant in the market. This could lead to a professionalization of the rental market, as smaller private landlords withdraw. At the same time, the focus will shift toward higher-quality rental properties, often accompanied by higher rental prices.

Social Implications for Tenants

Although the measure aims to reduce tenants' energy costs, its side effects may negatively impact low-income individuals. The reduction in the supply of rental housing is likely to result in longer waiting times for social housing and a widening gap between tenants with sufficient budgets to rent energy-efficient homes and vulnerable groups who remain dependent on lower-quality properties.

Regional Differences in Real Estate Dynamics

The impact of the measure will vary significantly by region. In urban areas with already tight rental markets, the scarcity of homes will be even more pronounced. In less densely populated regions, where properties are cheaper and demand is lower, the effect may be more limited. This could lead to further price increases in highly sought-after urban areas, while more vacancies might emerge in regions where the demand for energy-efficient homes is less significant.

Strategic Choices for Landlords and Investors

For landlords and investors, it is crucial to start thinking strategically about the future. Beyond renovations, it may be wise to reposition current properties, for example, through sale or conversion to alternative housing models. Investing in energy-efficient new construction or existing properties with better EPC scores could also prove beneficial. Additionally, it is important to evaluate the impact of the regulations on a location-by-location basis, as some regions offer greater growth opportunities than others.

What Does This Mean for You as a Real Estate Investor?

The new regulations make it clear that energy efficiency is no longer a luxury but a necessity.
As a landlord or buyer, it is essential to take a strategic approach to your property portfolio. Evaluate the energy performance of your properties and consider steps to enhance their value, whether through renovations, diversification, or investment in energy-efficient assets. A proactive strategy will be key to staying competitive in a changing real estate landscape.

Tips for Landlords and Investors:

Invest in energy-efficient renovations. Consider insulation, efficient heating systems, and solar panels.
Take advantage of government support. Enroll in renovation programs and group purchases to save on costs.
Prepare for stricter regulations. Ensure your properties meet the requirements to remain rentable.

Conclusion

The new regulations bring significant changes for both landlords and tenants, sharpening the focus on the real estate market in Flanders. The indexation ban is a first step in a broader plan to make homes more energy-efficient, compelling landlords to take action and future-proof their properties.

At the same time, opportunities arise for buyers willing to invest in less energy-efficient properties at lower prices. The growing importance of energy efficiency and sustainability also has additional effects, such as a shrinking rental market and a shifting investor profile, leading to new challenges.

At Homerun Real Estate, we closely monitor these developments and are ready to advise you on how to adapt smartly to these changes. Whether you want to revise your real estate strategy, sell properties, or undertake energy-efficient renovations, our team is here to provide you with personalized advice.