Mind the gaps

Context to the challenges

The UK has the least energy efficient homes in Europe, and we are overly reliant on fossil fuels for heating. Mains gas is the most common heating fuel, used by 74% of homes in England and Wales.[1] The UK imports 56% of our total gas use,[2] meaning we are at the mercy of global market forces that influence gas supply and price.

Residential emissions amount to approximately 17% of the UK’s carbon footprint.[3] This means decarbonising our homes will have a significant impact on overall emissions, as well as helping to improve air quality, health and the economy.

Despite ambitious targets of reaching net zero by 2050, bringing fuel poor homes to EPC band C by 2030, and installing 600,000 heat pumps per year by 2028, to date the UK has made limited progress in rolling out energy efficiency, renewable energy, energy storage and low carbon heating measures. We have been hampered by stop-start cycles in funding, fragmented regulation and the absence of a single clear national plan to deliver retrofit.

This means the combined pressures of the cost-of-living crisis, high energy prices, and health issues arising from poor quality housing, are as high as ever and are continuing to impact the most vulnerable people in society.

The skills gap

Research from CITB suggests that an additional 350,000 full time workers will be needed by 2028 in the UK retrofit sector, an increase in 13% of the current workforce.[4] To meet this increased capacity, we will need to bring new entrants into the sector as well as retraining the current workforce. The Heat and Buildings strategy outlined that there are currently over 130,000 registered gas engineers and suggests that 50% would be willing to retrain to install low-carbon heating systems, if there is sufficient demand.[5]

Social housing retrofit presents an excellent opportunity for employment from under-represented groups, including people from the same communities that the sector is serving.

More diverse approaches to recruitment into the sector need to be sought, to attract young people entering the workforce looking for future-proof skilled employment that contributes to the climate agenda. By improving equality, diversity and inclusion of the retrofit workforce, we may help to reach more households that require retrofit interventions.

The resourcing gap

Housing providers often do not have sufficient time and resources to develop and execute long-term plans for retrofitting their homes. Faced with competing and immediate pressures from customer complaints, regulatory standards, building safety, and financial challenges, meeting long-term net zero targets often gets pushed down the priority list. Investment into retrofit specific, resident facing roles, such as retrofit assessors and coordinators, is frequently delayed or outsourced.

Decarbonising homes should be viewed as an opportunity to tackle multiple issues at once. Properly retrofitted homes will overcome damp and mould, reduce building safety issues, and improve residents’ standards of living by providing warmer, healthier homes with lower bills. Large scale retrofit across whole estates can tackle broader issues, such as reducing instances of anti-social behaviour.

Resourcing challenges can be overcome by developing trusted, long-term partnerships with the supply chain. Partners should: be aligned with organisation’s priorities for retrofit, be able to contribute to your strategy development, and have a demonstrable approach to sensitive resident engagement.

The advice gap

It can be a challenge knowing where to start in developing a long-term decarbonisation strategy. There are however some valuable, free, impartial sources of advice available to kick-start the retrofit journey.

Retrofit Advice Support and Expertise (RISE) is a government funded service established to support housing providers to access retrofit grant funding and to increase skill levels across the sector.[6] Through the delivery of webinars, courses and one-to-one advice, they are helping to develop capabilities of social housing providers in retrofit.

The Energy Saving Trust has been providing independent energy advice to households and housing providers throughout the UK for decades. It maintains data on the energy saving potential of emerging and established technologies. In Scotland, it manages Home Energy Scotland, a route for householders to access advice, grants and loans for energy efficiency installations which are suitable for their home situation. There are also a growing number of other one-stop-shops providing retrofit advice that leads onto accessing grants and installing retrofit measures.

The finance gap

The increasingly constrained fiscal environment in the UK and changes to funding levels and mechanisms raise the question of whether there is the necessary capital to meet retrofit ambitions. Over the last decade, funding from central government for energy efficient retrofit projects has been inconsistent and insufficient to deal with the scale of the challenge. Local authorities have seen significant cuts to their budgets which is impacting their ability to finance retrofit at scale. Rent caps impact all social housing providers, making it challenging to recover any investment in retrofit.

Recently though, more funding from diverse sources is being made available. In addition to government grant schemes like the Social Housing Decarbonisation Fund (SHDF), climate-related risks and opportunities and a growth in impact linked investments have seen an increase in lenders’ providing capital to the social housing sector. Several well-developed mechanisms are available to local authorities and housing associations:

• Retail banks have created lending capacity in this space worth several billions.[7]
• Social housing landlords issue sustainable bonds to build affordable, energy efficient homes, with one raising nearly £1bn from three bonds.[8]
• Bond aggregators use sustainable bond frameworks to lend to smaller housing associations using proceeds from long-term bonds.[9]
• Local Climate Bonds show the potential of leveraging funds from residents for improving their communities.[10]
• Renewable energy can generate reliable revenue streams. For example, Pobl are exporting excess solar generation from the Penderi project to generate an estimated income of £100,000 per year, whilst also saving residents money on their bills.[11]

Retrofit projects do not always need to include every measure – the lowest hanging fruit in terms of price and convenience can still make significant differences to a household’s bills, emissions and comfort, as well as maximising the benefits of switching to low carbon heating further down the line.

We need to re-think how investment in energy efficiency and low carbon heating measures are communicated. We often talk about return on investment and payback periods when it comes to energy technologies. However, when housing providers are addressing building safety issues, or refitting bathrooms and kitchens, ROI and payback are not part of the decision-making process.

The financing gap stems from the perception of a limited investment case, exacerbated a lack of resources required to drive the business case for retrofit. To close this gap, housing providers need to consider the holistic, long-term benefits of retrofit. Developing a retrofit strategy with buy in from key stakeholders will help to build the investment case for retrofit and reduce barriers to unlock the required capital.  

Summary

We know there’s no silver bullet for solving the challenges to creating warmer and lower carbon homes. Different mixes of retrofit measures are suitable for different homes and residents, funded from a range of sources, and delivered by a diverse set of stakeholders.

Early planning for retrofit, taking a long-term view and looking at the holistic benefits of creating warmer homes, are all key to success. This will include investing in resources and building long-term delivery relationships with trusted supply chain partners.