Why should housing associations retrofit older properties now?

The UK is currently facing a housing crisis. There’s a chronic shortage of social homes, with nearly 1.5 million households on a waiting list for social housing in England, Scotland and Wales. At the same time, the UK has some of the oldest and worst insulated housing stock in Europe. 

Since 2021 we’ve provided around £4 billion to accelerate sustainability ambition, including investment in making the UK's housing stock more energy efficient. However, more still needs to be done to both increase the supply of new social homes while urgently retrofitting existing stock to increase its thermal efficiency. This would not only help to reduce the UK’s carbon footprint, but could also bring about a better standard of living and improved health outcomes for social housing tenants.  
 

Why do we need to retrofit social housing now?

Heat from homes currently accounts for around 16% of the UK’s total carbon emissions, and 35% of the total energy use. The UK Government has committed to upgrading as many homes as possible to meet an energy performance certificate (EPC) rating of C by 2035 ‘where cost-effective, practical and affordable’. By retrofitting social homes to make them more energy efficient, we can cut back on the emissions produced through energy consumption and get closer to meeting the UK Government’s Net Zero goals. 

The Government initially pledged £3.8 billion through its Social Housing Decarbonisation Fund (SHDF)  and announced  an extra £1.25 billion for the fund in December 2023 - as part of a commitment to decarbonising the social housing sector. However, reports estimate that the social housing sector will require at least £36 billion more in investment, in addition to the £70 billion that the sector already plans to invest by 2050³ to tackle decarbonisation and building improvements. 

Lloyds Banking Group was an early adopter of the Sustainability Reporting Standard for Social Housing (SRS) – a framework for reporting performance against 12 environmental, social and governance (ESG) themes across 46 criteria. 

Formulated by the industry to create a consistent and transparent framework for ESG reporting, the SRS framework has enabled organisations to effectively demonstrate their sustainability performance and strategies in a way that is consistent across the industry.

This consistency has helped give clarity to lenders and investors, as the SRS allows us to assess ESG performance, establish current baselines and measure subsequent improvements, in order to structure and deliver our ESG and sustainable finance solutions.

This framework can help Housing Associations deliver sustainable changes, as well as securing discounts on borrowing through ESG and sustainable finance as they demonstrate their progress against the framework.

Version 2.0 of the SRS was launched in October this year, following an extensive consultation period with key sector stakeholders. The updated version places even greater emphasis on the sector priorities, and particularly resident issues, with specific questions aimed at improving transparency around how adopters are dealing with the issues of damp and mould in the sector, along with questions around Net Zero targets and a greater focus on equality, diversity and inclusion. 

The most recent update helps the sector keep pace with relevant international frameworks, making it easier for adopters to demonstrate their ESG credentials. 

Through the evolution of ESG finance across the sector, and the wider adoption of SRS, we’ve deepened our client relationships beyond merely finance teams, with multi-layered discussions involving a range of teams across sustainability, asset management, and social and community impact to name a few. The SRS has been a catalyst for enhanced ESG reporting and has a crucial role to play in the continued growth of the sector for housing associations, investors and lenders alike.

 How do we balance the need for building new social homes with the need to retrofit existing ones?

Finding that balance is a delicate operation – both are important. The total number of new homes built in the UK in 2023 is forecast to be less than 150k  - Significantly below the 300k ambition by Government, and whilst there is a clear national requirement to build new sustainable homes at pace and scale if we are to achieve our Net Zero ambitions, there is also an urgent need to accelerate the pace of retrofit of existing housing stock.

Of the 29 million homes in the UK, around 5 million are in the social housing sector. Whilst there are numerous challenges to delivering retrofit, improving the quality of existing homes has always been a core focus of housing associations. 

The benefit for the tenants of improving the standard of the home and saving on fuel bills are obvious but in the longer run the housing association, and society more broadly, also benefit. The cost of retrofitting is significantly lower, and the pace of roll out significantly higher, than developing new homes. It is key that they run in parallel as we face into the climate emergency. 

The average new-build property emits just one-third of the carbon of a typical older house as they are constructed using new technologies and materials, and built to ever evolving regulations. That’s a saving of 2.8 tonnes of carbon per year, per property, and we need to update older homes in line with this so that they are not both a carbon and financial drain.