New SHDF statistics show progress, but we need to go further on decarbonisation

New statistics released by the Department for Energy Security and Net Zero (DESNZ) on 18 May show, for the first time, the impact of the Social Housing Decarbonisation Fund (SHDF) on the energy efficiency of social homes, writes Matthew Scott, policy and practice officer at CIH.

Despite its limitations, the energy efficiency of domestic homes is measured by Energy Performance Certificates (EPCs), which classify homes into seven bands, running alphabetically from A to G. A is the most energy efficient, and G the least.

An EPC band C is the minimum to which the housing sector is working towards and is key to government targets on energy efficiency and fuel poverty. Following the publication of the Clean Growth Strategy in 2017, the social housing sector has been working towards making all homes EPC C by 2030. A parallel target exists to bring all fuel poor homes up to EPC band C by the same year. The SHDF is DESNZ’s flagship energy efficiency scheme for the social housing sector, which has been through a demonstrator and first phase. A second phase of funding has recently been announced, with delivery of the first phase drawing towards a conclusion.

The May 2023 statistics release is the first to include a pre and post installation EPC matrix, showing the impact of SHDF installations on the energy efficiency of social homes. Staggeringly, of those 2,281 homes that are listed as having a known pre and post installation EPC rating, over 99 per cent of homes improved through the SHDF to date ended up with an EPC band C or above. However, it should be noted that a considerable number of homes in the statistics have a pre- and post-installation EPC listed as unknown.

The most likely reason for this is because most homes improved by SHDF start off as an EPC band D. The statistics show that of the 2,281 homes that have a known pre and post installation EPC rating, 2,061 started off as an EPC band D. The improvements required to get these homes to EPC band C are therefore less difficult.

By comparison, the government’s other energy efficiency schemes, especially the Home Upgrade Grant (HUG), which is targeted at off-gas homes, treat a far larger proportion of energy inefficient homes – especially those in bands F and G. To date, these statistics show that of those 2,281 homes, only one improved through SHDF had an EPC rating of F or worse before improvements were made.

The statistics arguably take us back to an old debate over fruit, and the relative merits of tackling the low hanging fruit or the juicier – but harder – fruit higher up the tree. Viewed in strict terms, every home improved from EPC band D to C is a home probably lifted out of fuel poverty by the government’s definition.

The social housing sector also has a relatively smaller proportion of E, F and G properties than other tenures. DESNZ’s latest fuel poverty statistics suggest that approximately 133,000 social rented homes were in EPC band E, F or G in 2022. This is around 3 per cent of all social rented homes. By contrast, around 10 per cent of all owner-occupied homes were EPC band E, F or G in 2022, and 13 per cent of all private rental homes were the same.

The social housing sector therefore has a smaller proportion of the least efficient homes compared to other tenures. Just over a quarter of its homes, again according to the latest fuel poverty statistics covering 2022, are EPC band D. It is therefore reasonable to argue that this is where the focus of the SHDF should primarily lie, especially considering the competing pressures on the finances of registered providers.

But it still leaves us with 133,000 of the worst performing homes in need of improvements. By definition, these homes are the hardest and most costly to treat, and the least affordable for residents. And it also leaves us with the conundrum of low-carbon heat. The SHDF statistics show that programme delivery to date has been focused on insulation, especially loft, cavity, and solid wall. This is to be expected given the fabric first philosophy underpinning the programme. Only 4 per cent of measures to date have been low-carbon heat.

So, we are left with two headaches. The first is the relatively small – but by no means insignificant – number of social rented homes in EPC bands E, F and G; and the second is the need to ramp up the installation of low-carbon heating technologies, especially heat pumps, in social rented homes. But if the first is costly for landlords, the second is difficult for both landlords and residents, both of whom are rightly concerned about the running costs in an era of high fuel prices.

The solutions seem to me to be twofold. Firstly, injecting more public funding into energy efficiency funding across the board – not just SHDF – to enable the effective improvement of homes across all tenures. This must be a long-term commitment, to give the supply chain and the housing sector the certainty needed. A long-term retrofit programme with an underlying strategy would allow us to tackle the low and not-so-low hanging fruit, providing the best chance of meeting fuel poverty and energy efficiency targets.

The second is reducing the price of electricity as a matter of urgency. Long-awaited reform to the electricity market would help to achieve this, as would the introduction of a social tariff, which will make heat pumps cheaper to run for vulnerable social housing residents and encourage landlords to plan for their installation.

Of course, if it was this easy it would have been done already. There are broader issues with regulatory reform, green skills, and the supply chain, to name but three. But these two solutions would go some way to building on the success of the SHDF and enabling it – and the government’s other schemes – to insulate and decarbonise our homes most effectively.