Landlords across England and Wales will be banned from renting out energy inefficient homes from April 2018.
They will be required by law to upgrade their leakiest properties and make it more efficient, with a rating of at least Band ‘E’.
A typical Band C home faces energy bills that could be £1,000 lower than a Band F or G rated home. Almost 10% of privately rented homes in England and Wales currently fall below the E rating.
The new regulations are expected to help around one million tenants.
From April 2016, they will also have the right to request for improvements to make it cheaper and easier to warm their properties.
Energy Secretary Ed Davey said: “These new laws will plug the gaps in draughty homes – helping households to keep warm and drive down bills.
“Many of the poorest tenants will benefit and with government support, landlords can improve their properties at no upfront cost.”
The UK Green Building Council hailed the move as the “single most important piece of green legislation to affect homes and buildings”.
Acting CEO John Alker added: “The Government deserves huge credit for sticking to its guns as it provides the impetus needed to upgrade our worst-performing, most energy-hungry rented properties and will help to kick-start a multi-million pound market in energy efficiency products and services in the UK.”
The Government said it is also drawing up plans for a £25 million fund to support the installation of first-time central heating systems in off-grid homes.