BEIS confirms successful SHDF bids to be announced before year end
The project lead on the Social Housing Decarbonisation Fund (SHDF) confirmed successful bids for Wave 1 of funding would be announced before the end of the calendar year.
Unlock Net Zero event (picture: Places for People)
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Speaking at an Unlock Net Zero event in London, Matt Harrison, who has been charged with overseeing the fund through the Department for Business, Energy and Industrial Strategy (BEIS), announced the update.
There is a pot of £160m to be bid for in Wave 1 of the SHDF and in the government’s Heat and Buildings Strategy, released last month, a further £800m has been promised for Wave 2, which will be allocated in 2022-23 and 2024-25.
BEIS said that, by the end of this Spending Review period, just over £1bn will have been invested in the SHDF.
At the event, Mr Harrison said: “It’ll be a substantial bid window with a lot of delivery timelines. Not just a one-year, sort of ‘get it done, get done quickly’. We’re going to give a three-year delivery horizon as a minimum. I’m going to try to push that to five, see how I get on with the Treasury. And I expect people to be able to scale and plan and do better.”
At the same event, leading industry figures warned that inventive funding models for the path to net zero would be required, as the government will not be there to help it all the way.
Mr Harrison added: “Wave 1 is an enormously important opportunity for the sector. As I say, we won’t be covering all of this – Savills’ estimates [for the cost of decarbonising the housing stock] are quite eye-watering.
“We need to be able to leverage the government funding and whatever the housing associations and social housing sectors can bring to the market to get a decent amount of funding to get this market moving forward.”
His views were echoed by Tim Weightman, group executive director at Places for People, who said that in terms of financing the net zero objectives, “we can’t wait for government to come and tell us what the solution is”.
Mr Harrison, whose background is in the navy, compared the task of decarbonising the UK’s housing stock to that of looking after the nation’s naval vessels.
He said: “I looked after the nation’s naval base, I thought that was a challenging task. It’s a complex business, highly dangerous assets. And you know, we need to keep our people safe.
“It turns out decarbonising the nation’s housing stock is equally, if not more, challenging. I’m really interested to learn from the sector, what it is we need to do as the government, and the best way to shape our funds.
“There is no free money here. We’re here to buy carbon. What we have to do is demonstrate success. Success will breed confidence in what we’re doing to access that future fund.”
Austen Reid, UK director at Ritterwald, the consultancy, also spoke at the event. Mr Reid stressed the importance for housing associations to access the growing market of sustainable bonds and linked loans, emphasising that social landlords were firmly on the radar of international ESG investors.
Mr Reid said: “We cannot wait for governments to conclude how costs will be shared between housing associations and the taxpayer; the government grants will only be part of the solution.
“There is no shortage of private finance, as evidenced by the sector in multimillion-pound bond issues last year – debt capital markets across Europe and fast-growing interests and sustainable investment-related debt instruments such as green, social and sustainable bonds and sustainability-linked loans.”
Industry figures also warned that low-carbon investment is still not high on most investors’ priorities because the return is too low, and the existing reliance on traditional investment sources such as insurance and pension funds would still require revenue generation.
Rose Bean, executive director at Abri, said: “It comes back to the issue related to market values and return on investment because, right now, low-carbon investment doesn’t generate increased revenue. It doesn’t necessarily change market values or securitisation.
“So that’s the number-one blocker; not just the availability of finance, but that there is no return. And this is the issue the sector is grappling with.”
But there is hope it will start to change as green finance initiatives grow stronger and investment sources such as local authority pension funds start to take an interest in ESG investing.
The speakers were also keen to highlight the importance of mandatory disclosure requirements and the role it will come to play in the next decade in securing investment for green funds, as the protection of investors and transparency in sustainability-linked finance will take precedence.
Mr Harrison said: “I talked to the green finance team at BEIS today and one of the things that we are talking about is the fact that we are looking at mandatory disclosure requirements now.”
Ms Bean added: “So the government for some time has been very clear they want to move to a mandatory regime. It’s all about bringing transparency to climate risks and protecting investors.
“The week before last, in the net zero strategy, the government confirmed that it is going to move to a sustainability disclosure regime.
“So that’s probably... moving thoughts from ESG reporting to the future of mandatory disclosure requirements.”
Further hope for the social housing sector’s challenge of securing net zero targets was proffered by Peter Connolly, chief executive at Igloo Regeneration.
He said: “I think that housing associations have got a track record of addressing a lot of challenges: addressing housing need, addressing regeneration and working at scale. This really requires working at scale.
“It requires leadership from the larger organisations and a lot of the sector underlying that and it’s going to be the reality, because any mixed funding, any settlement is going to require the larger housing associations working together.”
A BEIS spokesperson said: “Improving the energy efficiency of our social housing stock is a priority over the next 10 years and we are committed to ensuring that funding is in place to enable us to save tenants money on their bills and meet our target to decarbonise social housing by 2050.
“We are working closely with social housing landlords to ensure we invest the Social Housing Decarbonisation Fund in the most effective and most cost-efficient way.”
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