Retrofitting properties for net zero: what do social landlords need?

Climate change is a critical global issue, and, for the social housing sector, inextricably linked to tackling it are increasing the energy efficiency of our homes and ending fuel poverty for tenants. By 2026, all new homes delivered by housing associations and co-operatives are to be zero emissions and, by 2045, over two million homes must transition from fossil fuel-based systems to low and zero-emissions systems such as heat pumps, heat networks and other technologies.

The Zero Emissions Social Housing Taskforce (ZEST), co-chaired by our Chief Executive, Sally Thomas, has already set out some of the key challenges for social housing. Following on from this week's debate in the Scottish Parliament on retrofitting properties for net zero, here’s what our sector needs in order to meet the Scottish Government’s ambitious targets:

Financial investment in retrofitting

Social landlords have already spent more than £400 million to reach the first Energy Efficiency Standard for Social Housing (EESSH). But, with the next milestone, EESSH2, requiring further improvements, in addition to the need for accelerated deployment of low and zero-emission heating technologies, we now need substantial investment. Almost 80% of SFHA members report that sourcing funding for retrofit measures is challenging and while there remain uncertainties around cost, estimates by the Scottish Government suggest that the total costs for the sector, inclusive of local authority stock, will be more than £6 billion. The costs of delivering deep retrofit, and implementing Enerphit standards, could be much greater. Our members leverage as much private finance as possible, however, the sheer scale of the task means public finance is vital for Scotland to reach its ambitious climate targets.

In the immediate term, SFHA is calling for a further expansion to the Social Housing Net Zero Heat Fund. While we welcome the recent changes, including more flexible application timescales and the inclusion of a new energy efficiency theme, only £10 million of the £200 million total has been allocated to this for 21/22 – and there is no guarantee it will be available in future. ZEST highlighted the importance of a ‘fabric first’ approach to retrofit which means ensuring that buildings are as energy efficient as possible so the energy we use is not wasted. Reducing demand also minimises costs which, in turn, helps to address fuel poverty and mitigate against energy price hikes such as those experienced in recent months. We’re calling for at least an additional £100 million to be allocated to this fund over its five-year lifespan and for a commitment to include continued funding for fabric first improvements.

A strategic, long-term approach to social housing 

Our previous research on EESSH2 highlighted various barriers to delivering on the currently proposed standards, including high capital costs and a relatively modest impact on fuel poverty. There are also clear technical challenges with even the modelled estimates suggesting only 41% of properties would achieve the target EPC B rating. The current standard also needs to be better aligned with net zero objectives and account for the proposed changes to EPC metrics. We understand EESSH2 will be reviewed in 2022 and hope the review recognises these concerns and delivers a holistic approach which offers positive outcomes for tenants.

As part of this review, and following the recommendations of ZEST, we would like to see capital investment for social housing which is structured and designed in line with the needs of the sector. Our members work to 30-year business plans, making it difficult to align investment and asset management strategies with short-term funding opportunities which typically require ‘shovel-ready’ projects. We urgently need a sector capacity assessment to inform a more strategic allocation of grant funding, which can be distributed fairly across the sector, based on need and in line with any revisions to the EESSH2 target. We also support the creation of a Green Heat Finance Taskforce to explore ways of funding and leveraging private investment and would like to see this assess options for innovative financing models for the social sector.

Mixed tenure and hard-to-treat properties

Social housing tenants living in mixed-tenure or hard-to-treat homes, such as tenements, should not be left behind in the transition to net zero. However, there are additional technical, financial and legal barriers involved in retrofitting and delivering communal works to these properties. The Heat in Buildings Strategy states that mixed-tenure buildings should meet EPC C or equivalent by 2040–45, and we are awaiting further action following the recommendations from the Scottish Parliamentary Working Group on Tenement Maintenance. We would support the Existing Homes Alliance’s (EHA) call for this work, including the review of legislation by the Scottish Law Commission, to be accelerated.

For retrofit programmes to be successful and delivered at scale, all housing tenures must be included, and we would also expect both the proposed National Energy Agency and the Local Heat and Energy Efficiency Strategies (LHEES) to help drive this. The LHEES delivery plans will be critical in co-ordinating mixed-tenure initiatives and local authorities must be adequately resourced to if these are to be effectively implemented by 2023. Social landlords, and their tenants, should also be included in, and consulted on, decisions on heat decarbonisation in their community in order to maximise the benefits and impact of area-based retrofit programmes.

SFHA supports a more co-ordinated approach to developing the appropriate technical solutions for hard-to-treat homes. We would like a structured programme to identify, design, develop and install retrofit measures for common property types. This could draw on existing work such as the deep-retrofit guidelines being developed by Strathclyde University and John Gilbert Architects. We also support EHA’s call for a £30 million to pilot deep-retrofit methods of achieving net zero.

Other supporting policies

Supporting policies are also needed to help address fuel poverty and ensure social housing tenants are not negatively impacted by the transition to net zero. In addition to exercising all existing powers to address fuel poverty, the Scottish Government should continue to lobby the UK Government to improve overall fairness in the energy retail market. We are also calling for £22 million for emergency redress funding and local advice services to support the transition to new technologies.

Against a backdrop of nationwide labour and material shortages, there are also about the availability of accredited installers to deliver on energy efficiency retrofit standards (e.g., PAS2030/35), particularly in remote and rural areas. The Scottish Government should adopt a flexible approach which supports high-quality delivery and provides additional financial support to develop skills, sustain local supply chains and ensure smaller contractors are not disadvantaged. We also support the EHA’s call for a ‘rural homes just transition package’ which recognises the distinct challenges and opportunities in rural, remote and island communities.

SFHA looks forward to continuing to work with the Scottish Government, and MSPs from across the parliament, on this critical issue. As ever, we’ll keep members updated regarding key developments.