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Government announces extra £1.25bn for Social Housing Decarbonisation Fund
The government has allocated an extra £1.25bn to the Social Housing Decarbonisation Fund, along with an extra £1.5bn for its heat pump upgrade scheme.
The additional funding for the SHDF will be be used to support the insulation or retrofitting of up to 140,000 social homes.
The schemes are among several being funded by the £6bn package of energy efficiency measures announced in the Autumn Statement in 2022.
The funding, details of which were announced by the Department for Energy Security and Net Zero (DESNZ) on Monday, covers the period between 2025 and 2028.
The extra £1.5bn for heat pump upgrades will be offered to households in England and Wales through the boiler upgrade scheme.
In September, prime minister Rishi Sunak announced that the grant available to households for air-source heat pumps and ground-source heat pumps would increase from £5,000 to £7,500 in October. This decision has led to a 57% increase in applications for the scheme, DESNZ said.
The new funding would therefore fund around 206,000 heat pump grants at the current £7,500 level. It typically costs around £10,000 to buy and install a heat pump in the UK.
A new local authority retrofit scheme has been allocated £500m to support up to 60,000 low-income and cold homes, including those off the gas grid, with measures such as insulation.
The retrofit scheme will be open to households on low incomes or homes with an Energy Performance Certificate rating of D to G, on and off the gas grid. It is planned to open in 2025.
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As well as £7,500 towards the installation of heat pumps, the government is offering zero VAT on installations. It aims to install 600,000 heat pumps a year by 2028 to cut carbon emissions.
However, only 55,000 were sold in the UK last year.
The department also pledged a new £400m energy efficiency grant would launch in 2025 for households in England to make changes, such as bigger radiators or better insulation.
It said further detail on the design of the grant will be announced in due course, including the naming of the scheme.
Responding to the announcement on the SHDF, Kate Henderson, chief executive of the National Housing Federation, said: “We welcome this announcement from the government today that it will release an additional £1.25bn funding for the Social Housing Decarbonisation Fund, which we’ve been calling for.
“In September we wrote to secretary of state Claire Coutinho, urging the government to release this funding and recommit to its manifesto pledge on net zero.
“It’s great to see that the government has listened, and by providing this additional funding, social landlords will be able to plan and invest in further retrofit works that will help lift residents out of fuel poverty, ensuring they live in warm homes that are affordable to heat.
“Housing associations are already leading the way on energy efficiency, with their homes being the most energy efficient in the country.”
She added that with the cost of living crisis affecting households on low incomes the most, the sector is “ambitious to do more and do it faster”.
“Today’s funding is a welcome statement of intent from the government and we look forward to continuing to work with all political parties, ahead of the general election, to ensure that funding this work remains a priority,” Ms Henderson said.
Tracy Harrison, chief executive of the Northern Housing Consortium (NHC), welcomed the government’s energy efficiency investment plans, adding that the “advance notice is the kind of signal the market needs to scale up for us to deliver real change to homes across the North”.
However, she added that the scale of the package is “not enough to tackle the huge energy efficiency mountain we must climb”, with 3.8 million Northern homes still below EPC Band C and require upgrading.
Ms Harrison said: “We need an investment on this scale every single year, rather than over the course of a parliament, if we want to cut carbon, lower bills and create warmer homes for people in our communities.
“The North needs politicians of all parties to commit to an ambitious programme of green home upgrades in the next parliament.
“The NHC is calling for a co-ordinated £6bn a year investment in home energy efficiency across all tenures, so together we can deliver more real change to real homes.”
Energy security and net zero secretary Claire Coutinho said: “Everyone deserves to live in a warm, energy efficient home. We have already made excellent progress, with nearly 50% of properties in England now having an Energy Performance Certificate of C – up from just 14% in 2010.
“This funding will help us go even further and will improve 200,000 cold, low-income and social homes.”
Chancellor Jeremy Hunt said: “Investing in energy efficiency, combined with energy security, is the only way to stop ourselves being at the mercy of international gas prices, one of the main drivers of inflation.”
Greg Jackson, chief executive of Octopus Energy, said: “Heat pumps are rapidly becoming cheaper and quicker to install in more and more homes, and it’s clear that this technology is the heating of the future.
“Our customers love heat pumps, and we’re planning on hiring two thousand new engineers next year alone to try to meet rocketing demand.
“This increased certainty from government enables us to invest with confidence and will unlock cheaper, cleaner heating for the UK.”
Earlier this month, the government opened a consultation into the proposed Future Homes Standard, which would make all new build homes “zero-carbon ready” from 2025.
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