English councils share nearly two-thirds of grant in Social Housing Decarbonisation Fund Wave 2.2

Among local authorities, Wolverhampton Council received the largest allocation, £5.1m, followed by Thurrock Council’s almost £4m, and the £3.8m allocated to council-owned housing company, Populo Living, on behalf of the London Borough of Newham.

The smallest award to a local authority went to Waverley Borough Council in Surrey, with £279,000, and the smallest to a housing association went to London-headquartered Birnbeck Housing Association, with £52,000. The association provides homes across the Midlands, the South of England, London, Essex and the South West of England, and at the time of the last Statistical Data Return owned 168 homes, of which a little over half were supported housing.

Announcing the allocations on Monday, the Department for Energy Security and Net Zero (DESNZ) said that the £75.5m of funding is accompanied by £139m of “match funding” from bidders. 

The investments will support up to 8,800 social homes to benefit from “free upgrades” to make them more efficient and cheaper to run, the government said. 

Social housing tenants could save as much as £400 a year on their energy bills as a result, while more than 1,300 jobs in the UK’s retrofit industry would be supported, it added.

Secretary of state for energy security Claire Coutinho said: “Our Social Housing Decarbonisation Fund is helping families to keep their homes warm and their bills down. We want to support hard-working families to make changes, rather than burdening them with unnecessary costs.

“This funding today will help up to a further 8,800 households save around £400 a year on their energy bills.”

The announcements came after the DESNZ director heading up the roll-out of the SHDF last week indicated that communications around retrofitting homes may need to adopt more of a focus on affordability, as opposed to net zero, in order to gain the “buy in” from tenants and residents required to complete works. 

Selvin Brown, director for net zero buildings – domestic, told delegates at the National Housing Finance (NHF) Housing Finance Conference in Liverpool on Wednesday 13 March: “We may need to down-weight the conversation on net zero for the purposes of persuading people and up-weight messages around affordability about energy bills and maybe even around energy security.”

Mr Brown said this was an approach that had been quite successful in mainland Europe. 

Asked then about the potential role of ‘warm rents’ in funding retrofit (through which some of a tenant’s energy savings are offset by higher rent to recover the costs of retrofit), Mr Brown said that the current focus was on helping the sector to fund decarbonisation without impacting the running costs or rents of tenants in those homes.

He said: “We’ve had, for a long time, the debate between fabric first, or clean heat. And wherever we are on the journey of that debate, we will not be requiring anybody to put clean heat into homes without the necessary fabric to make sure that we don’t compromise your social objectives around making sure that tenants aren’t paying more.” 

However he acknowledged that a wider conversation would need to be had about the long-term rent settlement for the sector.  

Mr Brown also emphasised that the next wave of the SHDF, Wave 3, would not be impacted by the timing of the next general election. But he cautioned that the sector should expect changes to the scheme rules, to ensure that clean heat objectives are met. 

Wave 3 is set to be the largest to date under the total £3.8bn fund, after the government announced in December that £1.25bn would be made available to “support up to 140,000 social homes to be insulated or retrofitted, improving energy performance and lowering bills”. 

The first full round, SHDF Wave 1, was aimed at delivering energy performance improvements in up to 20,000 social housing properties, with projects needing to be led by a local authority. It announced around £179m of grant funding to 69 projects in February 2022. 

Wave 2.1, which was open to RPs in their own right, as well as local authorities and ALMOs, saw £778m of an available £800m of government funding awarded in March 2023 to make energy performance improvements to around 90,000 homes, across 107 projects. 

Wave 2.2 then launched as a ‘top-up’ competition to allocate up to £80m of grant funding from April. This closed to applications on 31 January, and DESNZ’s Mr Brown had said last week that successful bids had totalled £75m, as has now been confirmed. 

Registered providers are continuing to weigh up how to pay for the major investments required into homes to reach Energy Performance Certificate Band C, and beyond this, net zero targets. 

Social Housing last week reported that the UK Infrastructure Bank is looking into “direct lending” opportunities to housing associations to fund retrofit, as well as the potential for a third party-managed fund to make loans below its minimum threshold to smaller borrowers.

The government had previously said in August that it was in “ongoing” conversations with the Treasury-owned policy bank over the potential to scale up retrofit funding. 

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