Domestic housing is a significant contributor to greenhouse gases, so a step change in the way our homes are insulated and heated will be required to achieve net zero by 2050.
Social housing will need to be part of this change.
To deliver, the sector will have to make an enormous investment in changing heating technology and improving the energy efficiency of its estates.
Potentially, this could be delivered as part of periodic maintenance, but this would delay change until late into the 25 years available before 2050 – by which time many thousands of tonnes of CO2 will have been released into the atmosphere.
One solution to this would be massive central government funding, which clearly is not going to happen. Instead, this article sets out an alternative approach by concentrating on the ‘total cost of occupancy’.
A disincentive for social housing providers to act on emissions is that, while they have to bear the cost of improving efficiency, it is the tenants that benefit through lower energy costs.
The Government has already taken some action on this front by requiring all rental properties to reach minimum energy efficiency standards. This, though, has led to the perverse result of social housing being sold on the open market because social landlords cannot afford the investment required to improve some of their worst-performing stock.
The solution I am advocating is that, if landlords can demonstrate that the ‘total cost of occupancy’ will be unchanged if they charge for the saving in energy cost, then this will be allowed. This could be done in a similar way to service charges.
The advantage of this approach would be that the housing provider would know that a revenue stream would be generated by the increased charges they could levy from making an energy improvement; and they would have certainty about their income, against which they could potentially borrow. By allowing landlords to charge in this way, the need for central subsidy could be reduced drastically.