Learnings that will benefit retrofit for decades

Peter Apps

The Social Housing Decarbonisation Fund (SHDF) is the most important funding stream in the decarbonisation of the UK’s buildings. Peter Apps speaks to some of the biggest bidders to find out how it’s progressing.

With billions in grant funding spread across several ‘waves’, the SHDF is intended to launch a much wider process of improving, insulating and finally detaching our housing stock from fossil gas.

The social homes improved by the project will – it is hoped – create the market and build the industries which will take the decarbonisation measures much wider over the next 30 years.

So how is the work being funded through the scheme progressing? Wave 2.1 allocated £800m in March, with projects due to complete by September 2025 – Metropolitan Thames Valley Housing has just finished 1,000 homes funded through the first wave of SHDF funding, and now has its £18m Wave 2 programme underway.

Jules Bickers, director of property – asset management at the 57,000-home social landlord, says one of the differences in approach this time around is to take longer to identify the right properties to upgrade.

This is because reliance on desktop data may not reflect the real world suitability of a property for decarbonisation measures.

“It’s only when you come to do the retrofit assessment that you understand exactly whether the planned measure is actually suitable for that property,” he says.

“So what we’ve done this time around is front load that assessment process.”

As a result, MTVH will complete around 400 properties this year, with the remainder of the 2,081 it has committed to under the programme due to complete by September 2025.

He says that officials at the Department for Energy Security and Net Zero (DESNZ) have been accommodating of this approach, but that the programme rules do not always support it.

“The idea, which I think is inherent maybe in the rules, is that you’ve got a perfect set of data which enables you to tell the department exactly what you’re going to do and what it’s going to cost at the outset. That’s not practical,” he says.

“Our experience has been that the officials at the department we’ve been working with recognise that there’s a reality on the ground that requires a little bit of lateral thinking. So that’s been really good to see, actually.”

Hard-to-treat homes

Another organisation which has been learning as it goes is Orbit, which was a member of the demonstrator project, with 69 properties, and a Wave 1 bid which involved 141 properties. It is now onsite with its Wave 2 projects, with 19 set to be completed by Christmas, 60 by the end of March and the remainder of its 212 through to September 2025.

It is focusing on its worst performing properties, many of them more than 80 years old.

“We have a real focus on fabric first, getting the insulation right,” says Jeanette Hodges head of property and investments at Orbit.

While in Wave 1, this involved quite a lot of external wall insulation (including some stone effect insulation for homes in conservation areas, pictured) it has largely moved away from this sort of work this time around, with a focus instead on cavity insulation.

“If the project is going across winter EWI is really hard to do. If it’s too cold or snowing you can’t do the external rendering,” says Hodges

Smaller interventions can have a bigger impact from a carbon perspective. “If you look at carbon savings, replacement windows will give you bigger carbon savings per pound spent than external wall insulation,” she says.

“We look at our properties holistically and see when the components need to be replaced. So we’re overlaying our SHDF projects with our investment programme, we’re not replacing components early which has a carbon cost,” she adds.

Securing the supply chain

Clarion, meanwhile, is the UK’s largest social landlord and the biggest individual bidder to the SHDF. It completed works to 117 homes in the demonstrator project and 337 in Wave 1 and is now working on 5,300 homes – plus more as part of a consortium.

“We are looking at the properties that would benefit most from the funding,” says Paul Norman, director of strategic asset management, at the 125,000-home housing association.

The landlord – which works across hundreds of local authorities – has kept the footprint for its work within 16. “You don’t want to be spread too thinly,” says Mr Norman. “This allows us to secure the supply chain in these areas and maximise the work we can do with the funding.”

A challenge for everyone in the built environment at the moment is build cost inflation, and retrofit is no exception.

“General building cost inflation is affecting retrofit in the same way as its affected all other parts of our supply chain,” says Bickers.

One issue is the programme’s cost caps – rules which limit the amount of funding which can be used for a particular measure. These have not been moved to reflect inflation, which mean providers are having to put more of their own resources in at a time when funds are stretched.

One of the ways it is managing this is to flex the number of complex properties in its portfolio for the funding. For example, some pre-fabricated post-war steel frame properties are a “huge challenge”, with just the design work very expensive. But there are lots of other properties as well, where quicker lighter works can have a big impact.

“Our programme has a small number of high expensive items and then a fairly long tail of very small interventions that might help a high [EPC] D property move into low C,” he says.

But if the cost caps were more flexible, higher rates could be applied to these harder to treat properties, which might actually make the money have more of an impact.

“We don’t need to ask for more money actually, but I think the flexibility of how cost caps are applied within your bid, that would give us the freedom that would give use the kind of freedom we would need to do a bit more,” he adds.

“We were in a position where subcontractors couldn’t hold a price for more than 48 hours and prices were increasing daily,” says Jeanette Hodges. “It’s beginning to flatten out a little bit now, but there are still those skill set shortages and we’re seeing these bottlenecks for particular labour resources.”

Orbit has amended its approach as it has gone through – co-designing an approach with the government where it has done fewer measures but kept the same number of homes so as not to disappoint households. It has also had to put more of its own cash in than it originally expected.

“There could be some more flexibility built into the programme,” adds Paul Norman. “Currently you see a lot of organisations going out to the market at the same time for the same kind of work, and that creates inflation and pressure for limited materials.”

He adds that the organisation would like to do more with renewable technologies. Currently, the funding mainly provides a route to upgrade the fabric of a home to allow it to transition away from gas at some point in the future.

But Clarion has many properties which could make that switch without expensive retrofit work.

“We’ve got tens of thousands of properties that might fit into that category, but they can’t benefit from the SHDF,” he says.

Longer term funding

What all the providers would like to see is longer term funding commitments.

“For us [the SHDF] has been great and DESNZ has worked really well with us,” says Hodges. “But what would really be helpful is a longer-term commitment to give the supply chain more certainty.”

How about the difficult question of engaging residents and keeping them on board?

Clarion’s Paul Norman says the landlord has learned a lot about customer engagement through its process. “It’s not like our normal decent homes work, where we are replacing a kitchen or a bathroom,” he says. “You are talking about a much longer time period and potentially much more disruption.”

“You can’t do customer engagement like you do with cyclical engagement. You have to be warming customers up way in advance, explaining what retrofit is all about,” says Jeanette Hodges.

Energy bills are driving people’s interest in having work done, though.

“People are very interested in having conversations about measures that might lower their bills,” says Jules Bickers.

“The environment has shifted from talking to people about Net Zero carbon and sustainability, which is important to people but has to be balanced against the disruption to their homes,” says Hodges. “But with the cost of living crisis and energy bills increasing it’s really important to our customers that their homes are warm and affordable to run.”

Orbit is continuing to visit the homes in their demonstrator project – and are finding residents who are in credit with their energy suppliers for the first time ever.

“Energy bills have put more and more customers into fuel poverty,” adds Norman. “And of course that has an impact if we’re talking about something that can save them money.

“But I think people are becoming more aware of the other benefits. We put a big emphasis on ventilation, and how it can help with damp and mould.”

One problem can be creating an expectation that something will happen and then not being able to fulfil it.

“Engagement with residents is generally positive and people are very interested in having conversations about measures that might lower their bills.” says Bickers. “We don’t know we can do something until we’ve turned up and done a survey, and we’re careful to make this clear to residents in our communication with them.”

But lessons like this are being learned as the programme develops. And they will feed learning that will benefit social landlords and others doing work like this for decades to come.