Social Housing Decarbonisation Fund: Five ways to prepare for Wave 2

Rubianka Winspear and Stuart Brown consider the steps landlords can take to prepare for Wave 2 of the Social Housing Decarbonisation Fund.

The Government's Social Housing Decarbonisation Fund (SHDF) is intended to provide £3.8 billion of funding over a ten-year period to help social landlords with the costs of decarbonising their housing stock.

While £240 million of the fund has been released via an earlier SHDF Demonstrator and Wave 1 of the funding, the Government is now scaling up and has announced a further £800 million for Wave 2. Publication of the official Wave 2 guidance is expected in July/August this year with applications officially opening in August/September. With this much funding on the line, how can landlords prepare for Wave 2?

Survey and plan

Landlords should have surveyed their stock and should be reviewing the data to identify the properties that require work and qualify for funding. These will be properties at or below EPC D (with some exceptions for EPC C+ homes). Landlords will also need to consider if the necessary works will be eligible for funding. While official confirmation is awaited, we understand that there will be a continued focus in Wave 2 on the "Fabric First" principles (where heat loss prevention measures such as insulation are prioritised). We also understand that there is likely to be more funding available for clean heat technologies such as heat pumps but only if the "Fabric First" principles are satisfied.

Prepare for scale

With almost four times the funding available compared to earlier stages, the Government is using this wave to scale up the retrofit works. Of the £800 million promised in this wave, £700 million is being released in the first tranche – referred to as a "big bang" approach to funding. BEIS has also indicated that they may introduce a minimum quantity of 100 social homes per bid, which demonstrates the focus on delivering projects at scale.

There is further streamlining of processes as well. While Wave 1 only allowed local authorities to lead bids, Wave 2 now allows registered providers of social housing (including Housing Associations and ALMOs) to lead bids. Funding can therefore be allocated directly to landlords so that delivery of the retrofit works can be as efficient as possible.

Procurement considerations

In addition to their general obligations under the Public Contracts Regulations 2015 (the PCR), local authorities will be required under the terms of the grant funding to ensure that they follow a PCR compliant process in procuring contractors.

With this in mind, and considering current market conditions (eg potential capacity issues given the number of energy efficiency works to be completed in relatively short timescales), landlords will benefit from preparing a procurement strategy identifying the most appropriate route to market well in advance of funding deadlines.

For example, where landlords are considering the use of framework agreements or dynamic purchasing systems, it is advisable to carry out suitable pre-market engagement now to identify an appropriate commercial purchasing tool so that the procurement process can be commenced as soon as possible following the notification of the outcome of any grant application.

Utilise other funding/grants

There are several other government grants/funding schemes open to local authority landlords. To date, the SHDF rules allow landlords to blend government grants to support works at the same home provided that blended funds are not used to fund the same works/measures. Landlords can therefore take advantage of other funding routes such as ECO4, the Sustainable Warmth competition etc. to ensure that they are maximising the funding streams available at each property. While SHDF allows for blended funding, the rules of alternative funding routes will need to be considered to ensure that blending those funds with SHDF do not contravene their guidelines.

Innovate

While official confirmation is awaited, BEIS have indicated that they are looking to incentivise innovative approaches to retrofit and have discussed allocating specific funding to support the "digitalisation of retrofit". To qualify for this element of the funding landlords will need to demonstrate their use of innovative technologies in their approach to retrofit. This could encompass data collection methods, energy usage optimisation tools, the streamlining of retrofit design etc. While this innovation element will not be a compulsory requirement for bids, it is clear that "digitalisation" is being actively encouraged by BEIS and landlords should explore this option in order to optimise their Wave 2 applications.   

Rubianka Winspear and Stuart Brown are associates at Trowers & Hamlins.