The new Labour government has firmly set its sights on accelerating the energy transition, aiming to deliver a decarbonised electricity grid by 2030. This brings forward the planned deadline from the previous 2035 date but will require significant investment and government intervention in a number of key areas. While that macro objective has implications for the sector (in terms of planning reform and links to the Future Homes Standard), other key priorities include energy system reform, improving energy efficiency in homes and climate change adaptation.
The sector is well aware of the challenges. The UK has some of the oldest and worst insulated housing stock in Europe, and it has been estimated that around 26 million homes need to be retrofitted (including around 4.1 million social housing properties). This will require a mix of public and private finance. While many in the sector will be focused on the imminent launch of Wave 3 of the Social Housing Decarbonisation Fund (which promises £1.2 billion of investment in the energy efficiency of social homes), many would like to see more detail on the government's route plan for funding retrofit in the longer term.
Energy costs remain high on the agenda, with recent energy price rises having drawn more families into fuel poverty. This puts increasing pressure on landlords to bring forward the necessary investment in energy efficiency and decarbonisation measures. In August 2024, Ofgem announced that the energy price cap will increase by 10% from 1 October 2024. That means that the annual energy bills for a typical dual-fuel customer will rise by £149, which will add further financial strain to households.
Warm Homes Plan
Labour's manifesto pledged an extra £6.6 billion over the next Parliament for retrofitting homes and rolling out clean heat, doubling the existing planned government investment, to upgrade five million homes.
According to the manifesto, the Warm Homes Plan intends to offer a mixture of grants and low interest loans to support investment in insulation and other improvements such as solar panels, batteries and low carbon heating. This will be rolled out in partnership with combined authorities, local government and devolved governments. The manifesto also made reference to the government working with the private sector (including banks and building societies) to provide private finance to accelerate home upgrades and low carbon heating.
Labour have also announced that homes in the private rented sector will be required to meet a minimum EPC rating of "C" standards by 2030. Further details are awaited, and landlords will want an early indication of how properties will be assessed, details on any exemptions and whether any further government support will be provided.
What's next?
In the absence of much detail on the government's planned Warm Homes Plan, some landlords are exploring fully financed options (including solar leases, comfort charges and 'energy as a service' approaches). These need careful review, particularly around landlord and tenant issues, electricity regulations and consumer protection. But what the market really needs is greater visibility of the long-term trajectory of government policy and clarity on the level of support available for the sector. That would help investors and developers frame financed offers to fill the gap. As it stands, the current uncertainty risks further delay to the great retrofit rollout.
