How does the government successfully deliver its Warm Homes Plan? (Blog 2 of 2)
David Lennan, Chairman, National Warm Homes Council
In the second of a two-part blog on key considerations for civil service policymakers preparing to publish the Warm Homes Plan (WHP) in the spring, I examine the sectors to upgrade homes first and the broader implications of delivery relating to partnering with SMEs in the retrofit sector to support the workforce and energy-saving technologies needed.
It is taken as a given that for decades, the easiest sector to scale up retrofit into is the social housing sector. It has always been ripe for scaling government interventions, and therefore, it makes sense that this sector is the one already with the best insulation.
Moreover, one contract in the social sector can lead to hundreds of properties being treated, and there is already a set of tier-one contractors (such as members of the National Home Decarbonisation Group) who can scale up to do the work subject to workforce availability and training.
Nonetheless, there are things that this sector could expand upon. Photovoltaics (PV), batteries (heat and electrical) and heat pumps are not in most social homes. Nor is good ventilation – mould and poor indoor air quality issues are alas far too common in British homes.
Social landlords tended in the past to wait for grants before carrying out upgrades. The lack of grants in recent years has changed that to some degree, and banks such as Barclays and Lloyds (and institutional investors), have started to offer them loans.
But one policy that has not got anywhere so far is the concept of tenants agreeing to retrofit in return for a higher monthly rent. This is currently impossible. Social landlords cannot charge higher rent in return for having installed insulation or renewables, as there is a standardised formula for setting social rents, and maximum annual increases for social rents are set by the government.
However, without question, there is progress being made in the social housing sector, accelerated by the prospect of social landlords being forced to upgrade their homes to EPC C within the next five years. If you’re looking for poor energy efficiency and fuel poverty, look in the owner-occupied and private rented sectors. These are much harder to scale delivery in, but the ones most in need of upgrading.
Many people in these homes simply do not have the finances available to improve them. There are stark fuel poverty issues here, and even low-interest loans will be unaffordable for most people. Given the current fiscal situation, I do not see enough grants being made available to cater for the growing number of people in need of funding to make home improvements – owners, tenants, or private landlords.
Beyond financial pressures, there are other reasons why people do not buy more insulation and renewables. These include a lack of awareness around retrofitting and the availability of installers – even trust in suppliers.
So what could trigger such a retrofit market to sustainably develop? In the long term, it’s got to be like any other market, of course. People will decide it’s in their own comfort or financial interests to do so. In the short term, there are policy levers that could be introduced, such as designing a stamp duty mechanism that rewards more efficient homes, which is revenue-neutral, and mandating energy efficiency or renewable upgrades at the same time as people apply for planning permission to do something else to their home.
Some fabric-first upgrades are disruptive, and what better time to do it than when you are doing other building work anyway? Even better if you could extend this somehow to not just those upgrades that require planning permission but also to permitted developments, too.
One pressing challenge is how to assess home energy upgrades. Right now, the only tool in the box is EPCs. These are woefully inadequate, and everyone welcomes their reform, and a consultation on EPCs is live right now. But how long will it take to change them?
The EPC calculation engine is meant to be based on the new Home Energy Model (HEM) that replaces the Standard Assessment Procedure (SAP). But the consultation for that closed in March 2024, and there still hasn’t been a response.
We saw that the HEM was flawed when it came to loft insulation, as it assumed it was a constant, forever, whereas everyone knows it degrades, mainly through compression and disturbance.
But we don’t know when HEM will be ready or improved, and without that, there will be no new EPC. At this rate, new EPCs may not be ready until the end of this Parliament, or later even. In this case, new interventions should probably be based on EPCs for now, notwithstanding all their faults.
The Future Homes Standard (FHS) is also worth mentioning here. The FHS won’t immediately create a retrofit market as new installs will be done by larger players into new builds, but the service and maintenance markets for them will be offered mostly by SMEs and sole traders. The transition to installing them for retrofit is much more manageable. Thus, the FHS could be a great scale-up driver for a lot of new technologies already widely available in the marketplace.
That’s why, to deliver the more than 6 million retrofit measures by 2028, the government will need to partner with organisations like the NWHC that support members in the built environment sector who are developing innovative energy efficiency solutions, such as loft insulation protection, vacuum glazing, insulative materials and ventilation.
This will be even more the case as there is currently a significant shortage of knowledgeable, skilled and qualified people to design, implement and maintain retrofit projects at scale. Many essential retrofit roles lack formal apprenticeship programmes, particularly in the insulation sector.
The retrofit sector requires 300,000 new jobs, but growth will depend on SMEs and sole traders, as low barriers to entry and high staff turnover make large national companies less viable. A stable, long-term market is essential to attract and retain talent, with SMEs playing a crucial role due to their adaptability and competitiveness.
By tapping into this burgeoning SME industry, the government will not only increase access to affordable and accessible home energy efficiency solutions but will also create the right long-term conditions, including effective workforce planning and skills training, to ensure the successful delivery of the WHP across both social and private sectors within the time frame it has set.
