New regulations will mean that landlords across England and Wales will be banned from letting out properties that are energy inefficient from April 2018.
All properties will need to be a minimum of a Band E rating for efficiency, therefore landlords will be required to bring them up to this standard, by law.
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.
From April 2016 tenants will have the right to request improvements are made to their rented accommodation, to make it easier to heat their home.
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.