Government-backed sustainable housing coalition sets out proposals for financing retrofit

The report outlines 21 so-called “demonstrator” projects that include financial, data, and standards-based solutions to overcome barriers to scaling up finance, as well as assessment and policy levers that could bolster the commerciality of these solutions.

These are split across six categories, including:

• Lending products
• Savings and investment products – including community municipal bonds
• Guarantee mechanisms – backed by the government or by insurance companies
• Tenancy agreements – green leases
• Energy service products – enabling house builders to recoup investment
• Data and enabling frameworks – including building renovation passports and standardised energy saving methodologies

A selection of the 21 proposed projects will now been taken forward as pilots.

The report’s publication, which includes suggestions for standardised approaches to reporting green buildings and retrofit projects as a means of stimulating investor demand, comes two weeks after the launch of a ‘white paper’ to create a sector standard for ESG reporting by a group of stakeholders within social housing.

Social housing

Referring to the social rented sector specifically, the CEEB’s report identifies barriers including “the short-term nature of grant schemes which can prevent more ambitious retrofit projects”, as well as the presence of private leaseholders within blocks of flats stopping landlords undertaking large-scale retrofit projects.

Some of the proposed solutions applicable to social housing include the creation of an “industry recognised certification for financial solutions that support the retrofit of residential buildings… to enhance the confidence of lenders and borrowers”, as well as a “certification scheme for green buildings and retrofit projects”.

It also proposes adjusting the definition of affordable rent to include modelled energy costs, to incentivise landlords to deliver properties where tenants can afford the combined cost of rent and energy bills.

Financial products for funding retrofit could include ‘community municipal bonds’, where local residents and other retail investors invest in issuance intended to fund energy efficiency projects in their area.

It comes after West Berkshire Council last month (30 April) voted in favour of launching a bond of this kind to fund projects in support of its 2030 ‘carbon neutral’ target.

The report recommends that the government delivers its manifesto commitment of a ‘social housing decarbonisation fund’, and also proposes a “loan guarantee mechanism” for lending to at-scale renovation projects within social housing to scale up the size and quality of the supply chain.

Commenting on the report, Rhian-Mari Thomas OBE, chief executive of the Green Finance Institute and chair of the CEEB, said: “In line with the Green Finance Institute’s theory of change – which focuses on creating opportunities for the financial sector to profitably support the transition towards an environmentally sustainable economy – the Coalition for the Energy Efficiency of Buildings is developing the market for financing net-zero and resilient homes through the co-design and launch of viable and impactful financial ‘demonstrators’ that provide the catalysts for further financial innovation and scale.”

Kwasi Kwarteng, business, energy and clean growth minister, added: “The [report’s 21] proposed demonstrators aim to support the development of innovative products to finance energy efficiency and build a vibrant market for energy retrofit. This will support the UK in delivering its commitment to move towards net zero whilst growing our economy.”

John Kraus, head of sustainable urbanisation at RICS, said: “RICS fully supports efforts to drive up energy efficiency in residential properties. The surveying profession is playing a central role through data standards, professional guidance, and tools to record buildings’ energy performance and embodied carbon.”

Melanie Leech, chief executive of the British Property Federation added: “Decarbonising the built environment is critical for our industry and retrofitting the existing residential sector is fundamental to successfully achieving this.

“Mitigating climate risk is not optional, it underpins economic resilience and our planet’s future, and this report and the Coalition for the Energy Efficiency of Buildings’ exploration of financial solutions will incentivise much-needed investment into creating a more sustainable future for the UK housing market.”