When it comes to retrofitting properties, the social housing sector is much further ahead than the wider housing market - both in carrying out upgrades and in securing funding for them. This is especially true given recent reports suggesting a retrofit guarantee scheme for social housing providers is close to launching.
The scheme, expected to receive partial backing from the UK Infrastructure Bank (UKIB), will reportedly be rolled out in the coming weeks by The Housing Finance Corporation (THFC) and Lloyds Banking Group.
This would be great news, as reducing the risk for lenders would enable them to offer lower-rate loans to housing associations, potentially building on the work already carried out as part of the Social Housing Decarbonisation Fund (SHDF).
The former Government set some ambitious goals for social housing, aiming for all properties to achieve a minimum Energy Performance Certificate (EPC) of C by 2030 and to reach net zero carbon by 2050. Through the SHDF, it also committed to investing £3.8 billion over the next 10 years.
So far, the fund has installed over 33,000 energy efficiency measures in over 17,000 households since it launched in 2021. Waves 1 and 2 of the scheme took a ‘worst-first, fabric-first, least regrets’ approach to retrofitting, laying the foundation for larger-scale measures in Wave 3.
Wave 3 is set to launch next spring, focusing on more extensive retrofits, such as air source heat pumps and solar panels. Some of our assessors have been involved in the scheme, which has produced very positive results, so we’re hopeful the funding will continue under the new Government.
Framework for the residential market
If a retrofit guarantee scheme were added into this, it would speed up progress even further, and perhaps also act as a model for the residential and rental sector.
Labour’s manifesto promised a Warm Homes Plan, with an additional £6.6 billion investment in energy-saving measures for homes. They pledged grants and low-interest loans to support investments in insulation, solar panels, batteries, and low-carbon heating systems, all aimed at reducing energy bills - yet little has been announced for homeowners so far.
If the retrofit guarantee model works well in the social housing sector, there will no doubt be hope it could expand to the residential market, where progress remains slow. Without some form of incentive, homeowners are unlikely to prioritise retrofitting anytime soon. While energy-efficient homes reduce heating costs, the upfront expense remains a significant barrier for many.
A Government-backed guarantee and low-interest loan could make a huge difference, especially if homeowners can see clear, long-term savings. The difference in heating costs between an A-rated property and a D-rated one of similar size can be significant. While it may be unrealistic for most homeowners to aim for an A rating, even upgrading from a D to a C can result in savings that potentially outweigh the cost of a loan.
Recent research from Rightmove found a typical three-bedroom, semi-detached house with a D rating faces average monthly energy bills of around £176, or £2,120 annually. This includes £930 for gas and £1,190 for electricity. However, upgrading that same property to a C rating could bring annual costs down to £1,528, saving almost £600 each year. Over five years, that totals around £3,000 in savings - making retrofitting much more appealing, especially with some form of low-cost loan.
While existing initiatives such as the Great British Insulation Scheme help, not everyone qualifies and a broader retrofit guarantee scheme could help encourage more homeowners to carry out the upgrades.
A retrofit guarantee would also be welcomed by landlords, who also need to ensure all of their rental properties meet a minimum EPC rating of C by 2030. So far, no schemes have been announced to help them achieve this target. With energy prices expected to rise again this winter, pressure is growing for the Government to act.
While the retrofit guarantee scheme for social housing providers is fantastic news, it would be even better to see something similar extended to the wider housing market, helping both homeowners and landlords.
