From April 2018, landlords will be required by law to get their leakiest properties to an energy efficiency rating of at least Band E.
Estimates suggest that the average difference in heating bills between an average home and the least energy-efficient properties, usually rented by fuel-poor households, is £880.
Secretary of state for energy and climate change 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.
“It’s good news all round and yet another way we’re taking action to ensure that cold homes with bloated energy bills become a thing of the past.”
John Alker, acting chief executive of the UK Green Building Council, said: “This could be the single most significant piece of legislation to affect our existing building stock in a generation, affecting a huge swathe of rented properties. The government deserves huge credit for sticking to its guns.
“Some will undoubtedly cry ‘red tape’, but good landlords and forward-thinking property companies have nothing to fear. This could provide the impetus needed to upgrade our worst-performing, most energy-hungry rented properties and help to kick-start a multi-million pound market in energy-efficiency products and services.”