Green Rents on the Rise: Tenants Drive Surge in Demand for Sustainable UK Rental Homes

A new report has revealed a powerful shift in renter behaviour across the UK: tenants are now actively seeking out – and paying more for – eco-friendly properties. According to a recent survey commissioned by Handelsbanken, 92% of UK landlords report that tenants are willing to pay a premium for greener homes, with energy efficiency now seen as a key differentiator in the private rental market.

The findings highlight a major commercial opportunity for landlords, developers, and property investors looking to futureproof their portfolios while supporting national net-zero goals. In a market still grappling with cost pressures and legislative uncertainty, sustainability has moved from 'nice to have' to 'profit driver'.

Key Trends from the Survey

Handelsbanken surveyed over 200 professional landlords and large-scale property investors across the UK. The results were compelling:

92% say tenants would pay more for a sustainable rental
77% noted increased demand for features like heat pumps, solar panels, and EV charging
74% plan to invest in green upgrades within the next 18 months
Energy efficiency is the top priority, ahead of location and property size for many tenants
Over 60% cited reduced void periods on greener homes

These findings come amid a broader shift in tenant priorities, particularly among younger, environmentally conscious renters who are now entering the market in large numbers. With energy prices volatile and climate action in the spotlight, green credentials are becoming a tangible factor in rental decision-making.

Financial Motivation Meets Environmental Awareness

While tenant awareness of environmental issues is clearly growing, landlords’ motivations are increasingly financial. Green upgrades such as insulation, solar panels, and efficient heating systems do not just cut carbon – they also lower operating costs, reduce maintenance issues, and support higher yields.

For landlords in highly competitive rental markets like London, Manchester, and Bristol, being able to offer reduced utility bills and superior energy performance ratings gives properties a real edge.

Landlords surveyed also noted that greener homes were less likely to suffer from long-term vacancies. Tenants are often quicker to commit and remain longer in properties that meet both economic and ethical expectations.

ESG Strategy Now Embedded in Property Investment

The shift is not just happening at the tenant level – institutional investors and portfolio landlords are increasingly adopting Environmental, Social and Governance (ESG) frameworks when evaluating acquisitions, refurbishments, and asset disposals.

In the build-to-rent sector, for example, ESG-focused developments are now commanding premium valuations from pension funds and global asset managers seeking sustainable income streams.

Many firms are also setting portfolio-level EPC targets, often aiming to achieve an average rating of EPC B or better across their holdings by 2030. In parallel, lenders are beginning to offer preferential mortgage terms or financing rates for properties that meet minimum energy-efficiency thresholds.

Government Policy Adds Pressure and Incentive

Tenant demand is only part of the picture. Government policy continues to shape the green rental landscape, with proposed legislation still on the table to make EPC C or better a legal requirement for new tenancies in the near future.

Although the deadline for this regulation has been pushed back, most landlords view it as an inevitability. Early movers not only avoid future penalties but also position themselves to maximise value when refinancing or selling.

Additionally, there are several government grants and funding schemes available to help landlords with retrofitting costs – though awareness remains low. For those in the know, however, the equation is clear: investing in sustainability pays dividends on multiple fronts.

The Bottom Line for Property Professionals

For those in the business of owning, letting, or managing rental property, the commercial case for sustainability is now well established. Greener homes:

Command higher rents
Attract better tenants
Reduce turnover and void periods
Lower running costs
Futureproof against policy changes

What once seemed a costly burden has become a source of margin improvement and portfolio resilience. In many cases, energy upgrades made today could enhance property value by 5–10%, especially when paired with other modern amenities.

In the words of James Sproule, UK Chief Economist at Handelsbanken:

“The green premium is real – and it’s only going to grow as regulation tightens and renters become more selective. For landlords, sustainability is no longer optional. It’s the smart business move.”

What’s Next?

With tenant expectations rising and climate legislation tightening, the UK rental market is entering a new era. Those who ignore the shift risk being left behind — with stranded assets, higher costs, and declining appeal.

On the other hand, landlords who embrace sustainability not only tap into a growing tenant base but also align themselves with institutional capital trends and government priorities.

From an investment perspective, the message is clear: greener portfolios are stronger portfolios.