Why should housing associations retrofit older properties now?
"Heat from homes currently accounts for around 16% of the UK’s total carbon emissions."
The societal benefits of retrofitting
While the transition to Net Zero is a good reason to retrofit homes, there is also significant social value in tenants having access to warm, high-quality homes – as well as for society as a whole.
Funding for houses may seem a separate issue to the pressures currently being seen in our health services, but in fact poor quality housing alone costs the NHS £1.4 billion a year1. In fact, research has shown that for every £1 spent on warming the homes of vulnerable people, we see a yield of £4 in health benefits.
As well as saving money for the NHS, research has also found that building more affordable housing could save the government £1.5 billion a year in costs relating to homelessness. Homelessness currently costs the government £6.5 billion a year, and a study by University College London (UCL) showed that building another 90,000 affordable homes a year would help the UK Government save money when it came to expenditure on housing and disability benefits, homelessness, and criminal justice service costs. It would also bring about potential longer term benefits in contributing to economic growth and higher productivity.
The benefits of retrofitting homes have been experienced across our social housing clients, including Home Group, who have recently retrofitted some of their properties near Cumbria. As a result of these works, some tenants have reduced the amount they have spent on bills from £7 per day to around £0.70. This is a hugely positive outcome for tenants, especially against the backdrop of today’s difficult economic climate.
Home Group secured a sustainability-linked loan with Lloyds Bank of £125 million in 2021, which will support their plans to build more than 1,000 homes a year. The credit facility includes financial and social targets, including enhancing the energy efficiency of its existing housing stock, and offering at least 120 apprenticeships a year.
Spotlight on: Home Group
Home Group is one of the UK’s largest suppliers of high quality housing. They’ve recently completed the first wave of retrofit on some of their existing housing stock, making their homes more carbon efficient, as well as bringing down bills and improving quality of life for their customers.
Despite a change in direction in some sustainability measures in the private housing sector recently announced by the Government, many Housing Associations still want to prioritise retrofit. Even though there currently isn’t regulation in place to compel housing associations to make improvements to their housing stock in England, we’re proud that many of our social housing clients are led by purpose.
We expect a consultation on the introduction of minimum energy efficiency standards (MEES) in the social housing sector that could set a statutory requirement for achieving an EPC C rating for social housing landlords by a certain deadline - however, many housing associations are already working towards a minimum of an EPC C rating for their existing properties , with new build at B, or in many cases A.
This is because they want to support their vulnerable residents, tackle fuel poverty, and bring about better outcomes for the people living in those homes. That’s why they are acting now, rather than waiting for regulation that tells them to.
Spotlight on: Queenie
Video | 1 min 34 secs
Queenie is a social housing tenant. Recently her housing association Home Group retrofitted her house. Find out what difference it’s made to her bills – and to her quality of life.
What are the current barriers to retrofitting social housing – and how to we remove them?
To help break down the barriers to retrofitting the UK’s housing stock, we need:
- Policy certainty: First and foremost, the UK Government needs to generate more confidence around retrofitting policy. We need certainty from Government on plans around regulation and funding so that housing associations and builders act with confidence.
- Fixing the retrofit skills gap: A significant barrier to retrofitting continues to be the skills shortage in the construction sector. If we’re going to deliver the urgent transition to low carbon homes, we need a greater influx of qualified professionals in the field driving the retrofit revolution.
- Technology: Energy generators like heat pumps and solar panels are great – but they’re not suitable for every household. We need these technologies to continue to evolve so that they can serve a greater number of homes.
The skills gap also plays a big part in the technological drawbacks. It’s essential that we make sure we have the right skills in place not just for installation, but also for managing these technologies into the future. At the moment it’s easy to find someone to service a boiler – the same can’t yet be said for servicing a ground source heat pump. We need to build up the technology capability and the knowledge base within the UK at the same time.
As a headline sponsor of Regeneration Brainery, we’re looking to close the skills gap by supporting them to develop new industry talent. In 2022, over 4,000 young people went through the Regeneration Brainery programme, with around the same number expected to go through this year. The programme was set up with the view to boost diversity within the property industry, overcome the sector’s skills shortage, and provide young people from disadvantaged and diverse backgrounds with the skills, knowledge and connections they need to have thriving careers in the construction industry.
What role does Lloyds Banking Group play in the social housing retrofit space?
As we’ve seen, retrofitting plays a key role in achieving the UK Government’s Net Zero targets while also helping tenants improve their quality of life, as well as reducing their bills. This is especially important when considering the needs of vulnerable customers with low financial resilience – many of whom are social housing tenants.
At Lloyds Banking Group we‘ve been by the side of the social housing sector for decades and are committed to supporting the sector in their mission to provide access to quality and affordable housing to people and families across the UK. Since 2018, we’ve supported over £16 billion of funding to the sector and we currently work with over 300 housing associations of all sizes across the UK, from small local associations of several hundred homes to larger regional associations managing tens of thousands.
In 2022, we supported £2.1 billion of new funding, of which £1 billion related to sustainability improvements, including retrofit investment and the decarbonisation of social homes, which has reduced tenants’ energy bills and helped to tackle fuel poverty.
However, to meet the challenges around the energy efficiency of UK’s existing housing stock, we need to continue to effectively support housing associations and housebuilders in bringing about the needed improvements to existing homes, as well as to continue to build new high-quality, energy efficient properties. Our role is to work closely with our clients to support them in striking the right balance between building new homes and improving existing stock, to bring about the best outcomes for social housing tenants, and to help Britain prosper.
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