If the UK’s carbon targets are to be met, existing homes will need to be retrofitted and new homes built to meet much tougher standards. The question everyone is asking right now is how social landlords will afford to do this work?
This is exactly what I’m currently working on. My mission is to include a strong, forward-thinking decarbonisation plan into our wider business plan at Raven and make it affordable and deliverable.
Last year, working with carbon consultants, we estimated that it is going to cost well over £100m to retrofit all of the 5,800 homes we’re responsible for so that they meet the government’s net-zero target for carbon emissions by 2050.
We now have a finalised decarbonisation plan, with a proposed technological solution for each home and costs profiled across the coming years. We have run this data through specialist software to review the net present value of each home across the next 30 years. The software creates a base model, within which we can change data and assumptions to analyse different investment scenarios without having to recreate from scratch each time.
We have now agreed on some specific investment/regeneration scenarios for our existing homes, which we passed to our finance team to model into the organisation-wide plan.
Importantly, in doing this work we are putting a lot of emphasis on looking at the social value of our homes, not just their financial value, to make sure that we are investing in the right properties and in the right locations for how people want to live, now and into the future.
We’re an organisation that is keen to save our residents time, give them options, and help them enjoy their homes. This means that our decarbonisation plan isn’t the only priority for us as an organisation right now. We also have high aspirations for excellent customer service, doing our bit to beat the housing crisis, and ensuring customer safety, all while safeguarding our long-term financial sustainability and good governance.
Given all of these factors, it should probably have been unsurprising that our first attempts at the model scenarios did not work, so we had to refine the plan and make it more realistic. Firstly, we took a ‘smooth and stretch’ approach – moving some works into later years and extending the plan a little. Then we adopted realistic assumptions about improvements to costs over time. We offset projected savings against our normal planned investment, as much of this will no longer be needed. We had to make some conservative assumptions about government grant over the years, but accept that at present this really does require a crystal ball.
We then identified some properties that are difficult to maintain into the long term. Examples include hard-to-let homes, listed buildings or others where future maintenance costs outweigh the benefits of the housing. A proposal for ethical release of such sites when empty could help us to deliver on our carbon programme, while also replacing those lost with at least equal numbers of new, high-quality social housing nearby.
Many organisations are planning to charge their customers a ‘comfort plan’ charge towards carbon retrofit work on their homes, which would come out of the savings that customers make from cheaper energy bills. However, at Raven we know that affordability is the highest priority for our customers, so we’re planning our retrofit programmes without passing on that costs to our residents, making homes not only more comfortable but also less expensive to live in.
In all of the assumptions above there are many uncertainties which we need government help to clarify. The most obvious is the need for clarity on policy across energy efficiency and carbon reduction. We need an approach that focuses on the long-term 2050 zero carbon goal while also incentivising early action. The current policy to first improve energy efficiency by 2030 holds a danger of two, sometimes conflicting, steps with potential duplication of work and waste of resources.
A long-term commitment to grants that backs up the government’s policy would give housing providers the ability to deliver much more before 2030, with the added benefit of speeding up economies of scale and helping to develop robust supply chains.
As a sector we can help with this by coordinating procurement, and there is some good work already going on to create frameworks, and to give certainty to suppliers, which can help us be more confident in the assumptions of a swift reduction in retrofit costs.
All in all, at Raven we feel we now have a plan that balances prudent assumptions against our ambition and practical delivery. However, as a sector we need to continue to push strongly for grant certainty. After all, large-scale retrofit by forward-thinking organisations like ours will be the quickest, most effective way for the government to meet its carbon targets in the domestic sector.