1 February 2022

To play our part in avoiding catastrophic climate breakdown, we need to decarbonise all homes in England by 2050 at the latest, including the 2.7 million homes owned by housing associations.

This means improving the energy efficiency of the leakiest homes, and installing decarbonised heat sources in every home – in most cases, heat pumps powered by a decarbonised electricity grid.

Done right, this should improve warmth and comfort for residents, bring down energy bills and create good quality long term jobs in local communities.

There will be no shortage of challenges along the way – deciding which technologies to use, how to train the workforce needed, how to build up supply chains, and how to ensure residents are engaged and supportive throughout.

But how we fund this work is one of the most important questions at the moment. We recently worked with Savills to estimate the costs of decarbonising all existing housing association homes. Any 30-year projection will be full of assumptions which could turn out to be wrong. But even on the more optimistic end of the spectrum, we estimate the work required will cost an additional £36bn, on top of the £70bn that housing associations are already planning to invest in their existing homes by 2050. Depending on the assumptions used for the future trajectory of clean heat technology, costs and electricity prices, the cost could be much higher.

These costs will be unevenly distributed across the sector. Housing associations with the least energy efficiency homes at the moment – because of the historic nature of their homes – will face the biggest bills. We know that finance directors and their teams will be grappling with these questions right now.

Costs on this scale will have implications for loan covenants and future lending – and we’re planning work with lenders and the government this year to explore what solutions could look like, including whether there could be a role for the government via guarantees or other schemes.

Knowing what to put into business plans is a real challenge, despite more policy clarity in recent months. So-called ‘hard to decarbonise’ homes pose some of the biggest questions – we’ll be looking at this in more detail over the coming months.

The Social Housing Decarbonisation Fund will be distributing almost £1bn in grant across the social housing sector over the next three years to improve energy efficiency. Making best use of this funding will be vital – and poses accounting and finance questions for a sector more used to dealing with grant funding for building new homes than upgrading existing ones.

And there are a range of innovative funding solutions which housing associations have been exploring – like the EnergieSprong model that Moat and others have used.

We’ll be exploring all these questions, and more, at the Housing Finance Conference and Exhibition on 16-17 March at the ACC in Liverpool, with experts from the social housing sector and beyond talking through the challenges and potential solutions in a new sustainability and green finance stream. This will include speakers from the Green Finance Institute, the Department for Business, Energy and Industrial Strategy (BEIS), Sustainability for Housing, and a number of housing associations.

To book your places for Housing Finance 2022, please visit the registration page.

Will Jeffwitz

Head of Policy at the National Housing Federation

Funding decarbonisation