Additional SHDF funding competition launched – are you eligible?

Jessica Arczynski and Rubianka Winspear set out some key considerations for landlords arising out of the Government’s announcement of Wave 2.2 of the Social Housing Decarbonisation Fund.

Many were pleasantly surprised at the recent news of DESNZ's release of £80m of additional funding under the Social Housing Decarbonisation Fund (SHDF) programme as Wave 2.2. While the Wave 2.2 award is significantly smaller than previous waves, it is a good opportunity for landlords who missed out on Wave 2.1 funding and have the ability to deliver fast.

While Wave 2.2 has similarities to its predecessor under Wave 2.1, there are still some key points for landlords to note:

• Delivery timescales: As with Wave 2.1, the funding must be claimed and expended by 31 March 2025, although the delivery window for the works themselves will run until 31 March 2026. Successful bidders must co-fund at least 50% of the project overall and at least 25% by the end of 31 March 2025.
• Who can bid?  Organisations that received Wave 2.1 funding (whether directly or through a consortium) are not eligible to bid for Wave 2.2. This is likely to be a good opportunity for those who were unsuccessful in their Wave 2.1 bids to revise their proposals and resubmit for Wave 2.2. Otherwise the funding is available to local or combined authorities and registered providers. Registered charities that own social housing may also bid but they will be required to provide additional evidence (e.g. in relation to rent levels) to demonstrate that their properties are genuinely social housing. Consortiums are permitted (provided a consortium agreement is in place) and may be led by organisations which have received Wave 2.1 funding, provided the lead partner is not receiving any Wave 2.2 funding under the bid.
• What properties are eligible? Properties that meet the statutory definition of "social housing" in the Housing and Regeneration Act 2008 and fall below EPC C will be eligible. As with previous waves there will also be allowances for non-social homes or homes that are EPC C or above on an "infill basis". The draft guidance recommends that any such "infill retrofits" are kept to the absolute minimum required. Wave 2.2 funding may not be combined with previous SHDF funding waves or used within properties that have already benefitted from SHDF funding.
• Bid size: As with Wave 2.1, bids are expected to include a minimum of 100 social homes (within EPC band D-G) although the guidance suggests that there may be flexibility for smaller bids where there is a sufficiently strong justification
• Updated Standards: The guidance states that Wave 2.2 requires all projects to be compliant with the PAS 2035:2023 retrofit standards. While this is an update to the PAS standards required for previous waves, the focus is still on the fabric first approach and there remains the emphasis on the various retrofit roles (eg retrofit co-ordinator, retrofit assessor and retrofit designer etc).
• Subsidy Control changes? As with previous rounds of SHDF funding, DESNZ has not included significant detail on the subsidy position in the guidance. It will be the responsibility of each grant recipient to understand their individual requirements under the Subsidy Control Act 2022, including whether there is an obligation to publish an entry about the award to the subsidy transparency database. Bidders should therefore obtain their own legal advice around subsidy compliance, and it is likely that DESNZ will require a copy of that analysis in support of grant applications. For previous funding waves (including most recently for Wave 2.1), the Government set up subsidy schemes in relation to the SHDF funding. No further details have currently been released to confirm whether a similar scheme will be set up for Wave 2.2, and interested bidders should keep an eye out for any further developments in this regard.

What are the next steps? The form of grant funding and data sharing agreement are expected in the week of 23 October with the competition launching in the week of 20 November. The competition is expected to close in the week of 15 January 2024. Given the tight timescales for Wave 2.2, we recommend that bidders start putting together their delivery strategies and consider their procurement and contracting arrangements. Potential bidders will also need to review their stock, allocate resource towards their bid teams and engage with tenants.

Jessica Arczynski is a Partner and Rubianka Winspear is a Senior Associate at Trowers & Hamlins.