Surfing wave 3

For English social landlords, attention will be turning to the third round of the Warm Homes Social Housing Fund (WH:SHF) which promises to dole out £1.25bn spent over the next 3 years. Inevitable bureaucratic processes aside, the guidance shows a cleverly constructed scheme hiding in plain sight, for those that stop to look. Those that don’t might miss the point, and the funding.

A really key point to register is that the housing industry and government can’t fund all the improvements needed to reach net-zero. Fact. Crudely, social landlords might find they only get £5k of grant on average across all their houses towards a total retrofit bill of £40k – helpful, but not much.

Plugging the funding gap

The good news is it’s likely that around £20k of that total is already in your maintenance budgets for end-of-life replacements, and perhaps £10k will be willingly leant to you by the private sector as long term secured investment. Whilst that doesn’t add up to the whole amount, throw in a little price reduction on key technologies through scale and innovation and it might just balance in time.

However, the hidden catch is that this only works if you spend the right money on the right measures – private finance won’t fund intangibles and does need a pay-back, whereas maintenance is focused on existing elements in the home. The grant can be spent more widely but do so unwisely and you’re closing out some of your funding.

The funding works to recognise the maintenance point too. Fifty percent of the spend will have to come from your own pockets through match funding, and that almost certainly means forward maintenance. WH:SHF Wave 3 will grant fund you up to typically 7.5k, giving you a total spend per home of £15k with your 50% match funding.

The answer is to stop thinking about WH:SHF Wave 3 as a ring-fenced project, where you aim to get all your selected homes to a certain milestone at the same time. Instead, build a process in your organisation that lets you assess every home in your portfolio around its individual condition/needs, its residents, and your maintenance schedule/budget.

Balancing fabric first and fabric fifth

You may have seen the debate on LinkedIn highlights how technical advances in heat pumps, together with price reductions and decarbonisation of the grid could be a better solution than more expensive and disruptive insulation of solid walls.

Net Zero is, at heart, striking a balance between scaling up and decarbonising electricity generation as the only fuel able to be zero carbon, and balancing the amount and timing of our electrical demands. WH:SHF Wave 3 starts to show where that balance falls – typically modest fabric improvements and inherent ventilation – combined with the electrification of the home. Reams of data now supports this as a more nuanced approach rather than old mantras stolen from a new build. This more individual and balanced approach should provide a modest reduction in residents’ bills at an achievable capital cost.

Submit expensive external or internal wall insulation schemes at your peril. WH:SHF Wave 3 caps the improvement to homes at EPC “C”, whilst simultaneously dropping fabric minimum requirements and pushing ‘value for money’ metrics: For most homes this means getting the basics like loft insulation, appropriate ventilation and robust doors and windows in place. It’s about lowering the demand from the home just enough, because beyond this the public’s money is better spent on the grid side of the balancing act.

The focus on decarbonisation, especially of heat, is clear. Whilst each home will need to be assessed, this probably means either a heat pump or PV & battery are the “technology” element of the bid. Of the two, there’s a clear route to private finance for PV & batteries, and only a few promising pilots for private finance of heat pumps. Which may mean the heat pump is the better grant spending for now – though don’t misunderstand, PV & battery is absolutely part of the solution for many homes in the UK, it’s just not necessarily the best use of the grant right now given other funding is available.

What does WH:SHF Wave 3 really want to achieve?

I’d suggest it wants to see a systemic approach that shows you can find your homes below EPC “C” and their forward planned maintenance budgets for elements coming to the end of their life – boilers, windows, fans, etc. across your whole stock. For bigger stocks, including how you’ll look to priority areas or other key metrics, show that you have a process that matches the maintenance money against any available grant. Typically add around 450mm loft insulation, smarter heating and ventilation, with plans for how you will electrify heat sources and install better doors and windows as they’re nearing their end of life.

At the same time, separately financed but as a part of a coordinated whole house plan, show the roll out of PV and battery using patience, ethical finance and share the savings with your residents to repay it. The different funding sources doesn’t mean you can’t deliver this through the same programme on the ground, it just minimises the number of visits to each home.

Delivering the best outcome

The landlords we’re working with are using all the above approaches to create the most streamlined investment available. We pick the low hanging fruit to maximise grant funding, we pair retrofit plans with investment budgets, and we avoid spending capital grant and investment budgets on things that the market will finance, for example PV & battery storage.

The answer is to stop thinking about WH:SHF Wave 3 as separate from day-to-day workloads. Begin to adjust your delivery so you can do this as ‘business as usual’ for the next decade or two.