28/04/2023
RETROFIT - CHALLENGE OR OPPORTUNITY?
With the oldest housing stock in Europe, retrofitting Britain's homes to meet net-zero targets is a complex and challenging process.
It requires careful planning, technical expertise, and effective communication with residents.
Retrofit is taking a property that is not performing as it should to become a safe, warm, affordable low carbon home.
The Government acknowledges the scale has been underestimated. In the social housing sector alone, to retrofit the housing stock would cost upwards of 6 billion pounds . According to Lord Callanan, (Minister for Energy Efficiency and Green Finance) they have currently provided about 1.4 billion in grant funding, which combined with matched funding through the SHDF (Social Housing Decarbonisation Fund) brings it up to an investment of about 2.5 billion pounds. Provision over a 10 year period will reach 3.8 billion.
The rest will come from private sector and institutions.
There are currently around 25 million homes in the UK. 80% will need to be improved. The full cost to retrofit a below par home is coming in at 20K-25K. Will the cost come down?
There is a cost of production curve - just like when flat screens came out, the early buyers paid a premium to be the first to watch an HD flat screen TV. Nowadays, everybody has one. It’s the same with housing stock to achieve C+ on an EPC scale.
Does AI (Artificial Intelligence) have a role to play?
Yes, academic research shows us that AI will be a major part in the future success of retrofitting and reporting on outcomes. Let’s get there first.
Housing Associations and private landlords face a range of issues when retrofitting their housing stock to meet net-zero targets.
There is legislation coming that demands residential homes of the UK will be improved to future proof for generations to come.
Boutique Capital believe these are some of the issues landlords face:
Cost vs Benefit
The commercial landscape and cost finance options are part of the upscaling opportunity and this can be daunting. Having a plan to engage the financial community is essential to navigate the landscape.
Retrofitting homes to meet net-zero targets can be expensive, and Housing Associations or landlords often operate on tight budgets.
It can be difficult to secure funding for large-scale projects, especially when the benefits of the retrofitting may not be immediately apparent.
There are lots of funding bids from Govt. such as Hug2, Eco 4, Eco+ . All of which come with different criteria and can seem like a maze, if you don’t have teams navigating this for you.
Funding bids look for a list of computed measures for each property and modelling done to scale. Applying that financial modelling, looking at different scenarios and presenting bids with a list of computed measures such as fuel bills and real time data is time consuming.
Then there’s the political grant boom and bust. The funding from Government goes in cycles, and the latest wave of decarbonisation bids have been submitted.
The cost benefit to retrofit the entire inventory; no one knows. That’s the truth. There’s a moral obligation and very soon a legal obligation.
It will pay to be ahead of the game.
Technical expertise: The opportunity for builders.
Retrofitting homes to meet net-zero targets requires a high level of technical expertise, including knowledge of building materials, energy efficiency technologies, and building regulations.
Housing Associations may need to hire consultants or partner with contractors who have the necessary expertise, which can be time-consuming and costly.
Private landlords will need to conform or risk going out of business.
The national retrofit strategy envisages there will be a half a million jobs boost for the economy.
We need the technical expertise, to create have a baseline performance metric in order to reach net zero emission. Organisations that train and provide the building expertise workforce will become increasingly valuable.
Can builders survive the downturn of new build, by adapting and training to retrofit existing stock? I believe so.
Having worked with builders for over 30 years, I have seen resilience & innovation become part of the industry.
Getting from EPC C+ to beyond B+
How many landlords trust EPC ratings?
Confidence in EPC data can be low, due to outdated information that doesn’t go deep enough. EPCs are valid for 10 years, they do not represent the current state. Rating scores can be altered with regulatory changes This is why real world, metered data is based on the solid foundation of the occupancy, and behaviour in a building. Also, where certificates are delivered internally, historically 3rd party contractors, domestic energy assessors may not appreciate the whole data is required from rooftop to baseline.
We all have to be on the same page.
With the current patch-based approach, working within multiple agencies across geographically diverse areas can produce a myriad of results.
Are EPCs suitable for funding structures?
As an advisor we know lenders are driven by the data that’s out there. Lenders look at it in aggregate for a broad picture, and if anything, are followers of the data, so it needs to be fit for purpose.
EPC is under review. Right now, it’s the only common measure lenders have and the only one that people understand. However, data is rapidly becoming faster, more accurate and in real time. Smart meters in the home provide better data than EPCs. They record what is actually happening in the home.
Boutique Capital technology partners will provide data that is aggregated from all sources, presenting an accurate holistic set of metrics that lenders favour.
More diagnostics can be integrated to provide quality data and this in turn can be fed back to a single source.
ESG reporting and investment - go hand in hand.
Total carbon footprint today as a baseline is how we can get to net zero. We need to know accurately where we are in order to move forward in the right direction.
Forecasts built on data that our technology partners can provide, enable the capital markets who are keen to invest, to do this confidently.
Retrofit credits, an under-utilised way of attracting funding are cash creators. Boutique Capital - understands the implications around carbon accounting and generating this surplus credit.
Talking to us will simplify the process. It's an important discussion to have; monetising the data. Creating cash revenue for landlords will alleviate the debt burden.
Accountability is integral on the journey to long term resilience, both in finance and particularly in relation to the skills and scale up of the workforce in retrofit.
Standing in Isolation
This national project is not done in isolation. The pace and scale of the retrofit challenge will succeed by working together. We don’t yet have a hub framework where everyone has a common approach to aggregate data, but it will come.
Monitoring retrofit and understanding the impact from energy consumption as with smart meters, can give landlords information on the impact their investment is having.
Current data sets have different levels of confidence. That which is most trustworthy on an annual basis allows continual improvement with holistic data capture.
From the right infrastructure, hardware and diagnostics are in place across the UK being trialled now.
Data driven decision making:
Build data dashboards within the strategy for management and continual investment by using the data you believe in.
8-10 data items captured from the home, that you believe in will provide more useful insights.
EPC
Smart Meters
Occupancy information
Gas Boilers
Safety risk assessments
Damp assessments
CO2 monitors
HVAC
Applying layered data sets will allow you to see gaps for further energy efficiency. Those EPC certificates may not be as good as they were 10 years ago, but this is something we have to face. Bringing all analytics in to one feed would simplify the process and create an effective dashboard.
We believe this would open up new delivery potential at a local level. If there are evidence-based packages for housing, then why can´t there be new opportunities for social housing to the private sector?
Modern methods of construction could blend into the solution for more affordable, warm safe homes.
A dashboard that can drive change becomes an asset management database. Our partnerships with large institutions would work more confidently with housing management.
Energy performance, gas meters, smart meters with additional insights through technology is how we align all the data points in to one hub.
Even from a range of services that some may not even be considered. Each property has a unique behavioural pattern and profile. Drawing it all in together is how we bring investment to the hub.
Boutique Capital have the partnerships in place to drive this, not through the mud but from a clear highway with our technology partners and our financial partners to a much smarter, greener future.
Homes can provide real time data for a smarter future
Disruption to residents: The “Why we need to do this”.
Retrofitting work can be disruptive to residents, especially if it requires major construction work or changes to the layout of the home. Housing Associations need to communicate effectively with residents to manage their expectations and ensure that they are informed about the work that is taking place.
Most of us now have apps on our phones. We track our fitness, the weather, our finances. We can do it all from the computer in our pocket. Our cars have diagnostics that tell us when a service is due, when the tyres need air, when our brakes need replacing. Our homes, the place where we should be happiest, needs the same.
People are at the heart of data. Building trust through collaboration is key.
Many residents suffer from evaluation fatigue, they are sick of being interrupted. If you lose the trust of your resident. You cannot get through the door.
Engaging with residents who are data minded and asking for volunteers to undergo retrofit, are the best start. Landlords need residents who want to be part of the journey to net zero. Early adopters should be the ambassadors with resident groups.
How we approach this opportunity and how we share the ‘why’ with them, and share the learning with them, forms the foundation of how we continue.
Planning and coordination: to scale up the work
Retrofitting a large number of homes requires careful planning and coordination. Housing Associations need to prioritise which homes to retrofit first. Develop a project timeline, and ensure that the work is completed on schedule and within budget.
A retrofit plan including remedial, lifecycle works and assessment for improvements, require an energy strategy. All of this planning has to be overlaid in the right way, so that the build team are not doing various jobs at various times.
The team to do this should lie within the organisation. The right people to liaise with residents and builders; networkers have to be committed and to the net zero goal.
Get it right and you’ve got a building passport.
The Uphill Struggle with Tenure and ownership:
In many cases, Housing Associations do not own the homes they manage, and residents may not be willing to invest in retrofitting work if they do not expect to stay in the home for the long term.
Reaching net zero is also a behavioural choice. Realistically, a lot of residents cannot switch behaviour. This can create a challenge for Housing Associations in terms of how to incentivise tenants to participate in retrofitting schemes.
The legal aspect to data sharing should be clarified by agreement, for example data sharing of electric smart meters could form part of the lease.
From the Occupant perspective, associating behaviour and the indoor conditions with maintenance and running costs; most residents think EPC is not relevant.
From the landlord perspective, the conversation needs to be bold even blunt, to improve the EPC.
Age and condition of the housing stock:
Older housing stock may be more complex to retrofit
The age and condition of the housing stock can also present challenges for retrofitting work. Older homes may have structural issues or outdated heating systems that make retrofitting more difficult, while homes in poor condition may require significant repairs before retrofitting work can begin.
Stock transfers take place if the stock is underperforming or difficult to manage, from one provider to another.
This can be an easy cash release for a major works program, but big providers have an ethical responsibility towards difficult properties.
Sterilised assets create a wilderness economy. Large landlords should not ‘hot potato’ the problem into the wilderness.
Which brings me on to Ethics
Data ethics, Integrity, appropriateness, granularity of data, scalability. Planning and reporting must all align with ESG targets.
Residents may feel there is a big brother agenda. Building the resident landlord relationship is massively important. From outset resident groups are ideal to work with and convey the benefits on health, fuel bills and quality of life.
Be prepared to be marked down when data comes in. But honesty is integrity and without being fully transparent there is no real baseline.
Supply chain training from in-house contractors, use of external contractors to stock condition and surveys in properties needs to be honest. Even if the EPCs come back worse than expected, it’s a baseline.
In summary
Housing Associations will need to work closely with their partners and stakeholders to create opportunities and achieve their sustainability goals.
Yes, it´s complex, it’s a major collaboration - to scale up and deliver long term broader economic benefits for social justice, skills, employment, lifestyle and health.
Can we boost productivity for builders? I believe so. Can we do it sustainably? Certainly. Will it improve the lives of residents?
The best way to predict the future is to create it.
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