How to meet the challenges of economic viability and decarbonisation in social housing

The Warm Homes Plan aims to retrofit millions of properties, beginning with social housing and specifically targeting fuel poverty and energy-efficiency improvements. While the plan offers hope for systemic support in the form of a proposed £3.4bn over the next three years towards heat decarbonisation and whole-house fabric improvements, existing supply chains are fragmented, inexperienced and overstretched.

In order for retrofit delivery to take place at scale, we need more contractors that have the right skills to install energy-efficiency measures and more professionals with the right expertise to respond to the triple challenge of energy improvement, decarbonisation and climate-risk mitigation. A better and wider distribution of skills geographically, combined with increased sector collaboration, is fundamental for the success of the Warm Homes Plan.

The Future Homes Standard aims to ensure new homes will produce 75%-80% fewer carbon emissions than homes built under 2013 Building Regulations. However, although implementation is slated for 2025, the final policy document and regulations have not been published yet, as the government is still considering responses to its 2023-24 consultation.

The industry needs a clear timeline and an adjustment period to trial the new Home Energy Model (HEM) which, when released, will replace the current SAP methodology. The HEM will have wide implications for how energy ratings are assessed and assigned, particularly when overlayed with the Energy Performance Certificate reform which is also underway – another reason why transition periods and advance timeframes are needed.

The government’s Clean Power 2030 Action Plan, under which clean energy sources will produce at least as much power as the UK consumes in a year by 2030, represents both an opportunity and a challenge for social housing providers. While electric-only housing schemes are being encouraged to meet the Future Homes Standard, current grid capacity is woefully inadequate and misaligned with the net-zero goal. The infrastructure needs scaling at a faster pace to make fossil-fuel-free estates viable.

The infrastructure challenge is compounded by the current energy pricing structure. Under the UK’s marginal pricing system, the electricity market price is set by gas 98% of the time. This makes electricity costs soar in line with gas prices, on top of the cost of upgrading networks and supporting low-carbon energy projects.

Regional electrical pricing could play a role in supporting sustainable social housing, but some developments will still struggle to transition to zero carbon if location-related restrictions prohibit the development of local clean-energy generation.

To address this, the fundamental imbalance between electricity and gas prices needs to be removed. The recent announcement that green levies on electricity will be overhauled, which could remove £4.8bn of taxes, would be a step in the right direction. However, this is unlikely to happen in the short term.

In addition, social housing providers need regional planning approaches which recognise that different areas have varying capacities for energy generation and face distinct climate hazards. They should try to cluster developments near renewable-energy sources.

Social housing providers also need more comprehensive case studies and standardised guidelines on transition risk assessment, developed in coordination with professional bodies such as the Royal Institution of Chartered Surveyors  and the Urban Land Institute.

Rather than resisting the cost of decarbonisation, as a society, we should focus on quantifying the cost of inaction. For social housing providers, failure to address energy efficiency and climate resilience leads directly to asset disposals, reducing the overall stock available. This outcome directly contradicts government objectives to increase social housing provision and protect vulnerable tenants.

Allowing social housing properties to deteriorate further also creates higher costs down the line, both financially and environmentally, while failing to protect residents from fuel poverty and the well-being impacts associated with poor housing.