Closing the social housing retrofit gap
How housing associations can unlock value, cut costs and attract investment
Every year, the social housing sector spends ever more on keeping ageing stock up to standard, while also struggling to deliver the new affordable homes that the country needs.
It’s clear that government cannot close the funding gap on its own. The £15bn Warm Homes Plan is public investment spread across every tenure, while the slice ringfenced for social housing is smaller, at around £1.3bn of grant through the Warm Homes: Social Housing Fund, which rises to roughly £2.6bn once matched by the sector. Set that against the estimated £36bn needed to decarbonise existing housing association homes, and a further £11.3bn to meet the new Decent Homes Standard, and the shortfall is clear. We will need private capital, and we will need to be more cost effective in spending the budgets we do have. However, before any housing association looks outside for money, there is a great deal it can do with what it already has.
Money is lost every year to duplicated spend, closed procurement frameworks, and grant that is scoped to the cost cap rather than to the home. Assets are also routinely undervalued in ways that cost the sector dearly on the cost of debt. Improving value for money and gathering the evidence needed to challenge undervaluation are within the sector’s control and should happen regardless of what else the sector decides to do. Only once that work is done should the conversation turn to private capital, where there are proven and tested solutions.
Anna Moore, Chief Executive, Domna
This paper opens by setting out the scale of the problem, in terms of the investment needed, the legal obligations, and the gap between what government can fund and what the sector must deliver. The following three chapters then set out three achievable routes to tackling the country’s retrofit challenge.
The first of these three chapters argues that housing associations should value their assets properly, so balance sheets reflect what has actually been invested, and calls for reform to this effect. The second chapter looks at how the sector spends money today and identifies where cost can be brought down through better scoping, smarter procurement and basic data discipline, without a single pound of new financing. The third chapter turns to private capital, and shows that the structures needed to bring it in at scale already exist, are already being used successfully by other housing associations, and do not require anyone to take a leap into the unknown.