Decarbonising the housing association sector - costs and funding options

We know that housing associations have a huge role to play in helping England to reach net zero by 2050.

But we also know that decarbonisation comes at a cost. Decarbonising housing association homes will require replacing gas-fired heating systems with heat pumps or other forms of electric heating. Fabric improvements will be required to many homes to avoid increasing fuel costs, and to enable clean heat technology to adequately heat the home. The extent of the fabric improvements required will depend on how heat pump technology improves, and on the trajectory for electricity prices, over the next thirty years. 

We commissioned Savills to research the costings and funding options for decarbonisation of the social housing stock, so we can get a better understanding of what this vital work means financially for social housing.

In this technical report, Savills explore the options for reaching net zero:

1. Achieving EPC C by 2030, replacing gas heating with heat pumps 2030-2050 and counting on the costs of electricity and gas being rebalanced and improving heat pump technology to avoid fuel poverty.
2. Achieving EPC C by 2030, replacing gas heating with heat pumps 2030-2050 and continuing to improve the fabric to ensure that residents experience minimal difference in expenditure on heating, assuming minimal change to electricity pricing and heat pump technology.
3. Installing photovoltaic (solar) panels in addition to the other measures. This has the advantage that it will reduce the costs of running heat pumps longer term.

The cost scenarios in the report were modelled through a global business plan for the sector based on the Global Accounts published by the Regulator of Social Housing. This demonstrates that whilst associations can raise a significant amount in borrowings to cover a proportion of the costs, they will need support.

Related

This research was published as part of a package which included:

• Decarbonising housing associations’ homes to cost £36bn (Press release, 19 October 2021).
• Decarbonisation: a guide for housing associations (Resource, 19 October 2021)
• Decarbonisation of housing association homes - a briefing for external stakeholders (Resource, 19 October 2021)