What SHDF projects have taught us about housing retrofit

Together Housing's Illingworth project – in collaboration with SBS

With work beginning on the latest wave of Social Housing Decarbonisation Fund projects, Rachel England looks at some of the lessons learned from the initiative so far.

Housing represents a major challenge to the UK’s decarbonisation targets. With around half of the UK’s 28m homes dubbed energy inefficient, and targets in place to get all rented homes (accounting for one in five properties in England and Wales) to EPC-C certification by 2030, the race is on for retrofitters to implement much-needed upgrades at scale.

The government’s 10-year, £3.8 billion Social Housing Decarbonisation Fund (SHDF) opened with the first wave of £160 million funding in August 2021. In April of this year, £778 million was rolled out to successful applicants under wave 2.1. The scheme is designed to kickstart retrofitting activity in social housing across England, bringing thousands of homes to at least EPC-C level through a ‘fabric first’ approach that initially targets the worst-performing properties. Tenants are expected to save between £220 and £400 a year on energy bills, and benefit from greater health and comfort outcomes.

The 107 bid winners for wave 2.1 represent a range of projects, from the relatively modest £300,000 awarded to Wokingham Borough Council, to the enormous £49 million awarded to the UK’s largest housing association, Clarion, which will use the money to upgrade more than 6,000 homes as part of a consortium bid.

But as work begins on wave 2.1 projects, those involved are reflecting on the lessons learned during the first wave of the initiative. Its deadlines were extended by three months after it was revealed in February that just 7% of the expected energy performance improvements had been completed, setting the SHDF off to a shaky start.

Gary Lawson, Managing Director of Sustainable Building Services (SBS), says wave 1 presented a number of challenges. “In some cases, properties identified and included in the initial SHDF wave 1 funding submissions were based on historical or incorrect energy and property data. This subsequently meant some properties could not be technically delivered, proved too complicated or costly, or didn’t meet the SHDF pre- or post-outcome requirements.”

Additionally, he says, many clients undertook “traditional” procurement processes. “This delayed the appointment of contractors, installers and retrofit providers, which shortened the delivery window for projects.” Wave 2.1’s longer two-year delivery period, should, he says, allow for some additional buffer time (as well as scope for larger projects and greater market certainty).

Existing supply chains

The first wave also brought about a number of bureaucratic surprises. “For example, the long-established window installation supply chain had to obtain PAS 2030:2019 certification for that measure to be installed under SHDF,” says Lawson. “This meant that existing supply chains couldn’t automatically transition into working in this market, leaving an initial void across many traditional energy measures previously installed at scale.”

Indeed, Lawson says that many clients were largely unfamiliar with the standards requirements stipulated in the SHDF guidance. “When it comes to PAS standards there was limited knowledge and experience within the retrofit decarbonisation supply chain following the transition from 2017 standards, which added complexity, additional costs and extended timeframes compared to previously delivered energy efficiency schemes.”

Companies that were prepared for these requirements, however, have delivered very successful projects. Together Housing – in collaboration with SBS – even had its £1 million Illingworth project showcased in the House of Commons as an example of what retrofitting can achieve. Through the project – which focused on external wall and loft insulation – almost 70 properties had their EPC-D ratings boosted to a least a C rating.

“An essential part of our success here was having the project team – complete with contractors, consultants and supply chains – in place at an early stage,” says Patrick Berry, Director of Together Net Zero, which is part of Together Housing Group. “It is also important that all stakeholders work together. Preparing for net zero requires a joint effort so that everything is in place to achieve 2030 goals.”

Nicolas Gillanders, Chief Executive Officer at South Coast Insulation Services (SCIS), agrees, noting that clear communication is absolutely critical to success. “Communication between all parties is key to ensure a smooth completion of the retrofit project,” he says. “Looping the installers in on major changes such as start dates is essential to facilitate accurate planning and resources.

“From our experience with Watford Community Housing – where we’re working on a £5.2 million external wall insulation project across 250 properties – communication guarantees great collaboration, and a regular open conversation has led to a strong start to the delivery of the project.”

Some challenges remain, however – namely in what many fear as an impending skills crisis. Research from Reed Environment suggests that current rates of retrofit recruitment must triple if the country is to meet its 2050 net zero target. If they don’t, the UK won’t achieve its target number of energy efficient installations to meet the goal until 2105.

“The industry has changed significantly in the last 20 years. Many customers want to hire jack-of-all-trades, so we need to upskill our teams to be able to do the job,” says Gillanders. “While there are complexities to managing the spread of skills and continuous high quality, they are necessary to ensure homes are up to regulated standard, for the long-term. Without certified teams, we only exacerbate the issue and create more pressures down the line.”

Again, some companies will feel the impacts of this more than others. “To date all of our retrofit investment programmes have been pre-procured with contractors being tied in to long term contracts,” says Berry. “So this may affect social housing providers who are responding more reactively.” Others meanwhile, are taking a more leftfield approach to meet the challenge, with Clarion exploring the feasibility of training its residents in green jobs such as installing heat pumps.

Addressing the skills shortage will be critical if the retrofit challenge is able to evolve in a way that aligns with government ambition. As Berry says, “Future emphasis will not only be on improving housing stock through traditional retrofit measures, such as insulation, but also through the installation of renewable technologies such as heat pumps, solar PV and battery systems.” Lawson also anticipates that digital technology such as data collection, property sensors and monitoring will become more prevalent in the sector, helping to accelerate programmes.

The future of SHDF

It’s not clear yet what the next wave of SHDF funding will entail, although as evidenced by the evolution of requirements between wave 1 and wave 2.1, it will undoubtedly draw on lessons currently being learned. Stakeholders should therefore make sure they feed back on their experiences to help shape future guidelines for the better.

However, some would like to see more ambition from the initiative. According to Lawson, the SHDF needs to do more to embed a more comprehensive roadmap throughout the industry. “We need to look at ‘deep’ retrofitting,” he says. “The SHDF is typically only funding properties to achieve C ratings, but additional funding, or funding aligned to lower carbon standards such as A or B ratings, could better help achieve government targets.

“The government could also align SHDF – or set requirements with SHDF future phases – to take a more ‘area-based’ approach, so that whole estates and communities are improved. This would see wider improvements made, rather than just improving social homes and leaving many privately-owned homes to remain energy inefficient.

“Simply put, SHDF has the potential to act as the catalyst for widespread community improvements across larger areas, providing economies of scale to encourage both private owners and landlords to decarbonise their properties.”