In 2023 and early 2024, the discourse around retrofit was dominated by the barriers, particularly the lack of funding. Fast forward nine months, and while funding remains a key topic, the conversation has evolved. Now, the focus is on how landlords are exploring funding beyond grants, developing strategies to deliver at scale, and making retrofit a standard practice.
Several factors have contributed to this shift. The private sector's growing interest in investing in retrofit projects, coupled with the release of Wave 3 of the Warm Homes Social Housing Fund, has certainly played a role. However, the most significant driver is the determination of landlords to make retrofit a reality.
Key factors:
1. Fuel poverty and energy efficiency: The energy crisis has heightened awareness of fuel poverty. Boards are increasingly motivated to improve the energy efficiency of homes to reduce residents' energy bills. In 2025, we anticipate that more landlords will define their decarbonisation strategies based on the potential reduction in residents' fuel bills.
2. Mainstreaming retrofit in asset management: Retrofit is becoming a core component of asset management. The connection that retrofits done well, address competing priorities, such as improving conditions for dampness and mould has been made. There is also a growing recognition that retrofit is an enhanced form of planned maintenance, which, if well-planned, can reduce the additional cost of retrofit.
3. Integrated budgets: A notable trend is the merging of decarbonisation and planned maintenance budgets. This integration allows landlords to transition from merely maintaining properties to both maintaining and improving them. This approach is expected to gain traction in 2025, with more landlords aligning their decarbonisation strategies with their planned maintenance.
The journey from questioning the feasibility of retrofit to embedding it as a business-as-usual practice is underway. With continued innovation, commitment, and the Wave 3 allocation announcements in 2025, next year I have every confidence we’ll see large-scale projects delivered and increasing confidence throughout the sector that it can be done.
The announcement of continued funding under the Warm Homes: Social Housing Fund Wave 3, despite some delays, was a welcome development. Notably, the introduction of the Strategic Bid has been pivotal in shifting landlords' focus towards delivering retrofit at scale. However, there are still critical lessons to be learned.
One significant issue that remains unaddressed is the boom-bust cycle created by the application process and funding requirements. While the Strategic Bid process has introduced some flexibility by not strictly stipulating the homes to be improved, the need to specify homes and measures upfront continues to constrain delivery. This project-centric approach forces the sector to plan retrofit works as discrete construction projects rather than as ongoing processes.
The sector has seen funds returned due to the inability to deliver within the stipulated timeframes. Understanding why this happens and identifying necessary changes is crucial. The rigid entry requirements and project-based thinking need to evolve to support a more fluid and process-oriented approach to retrofit.
To truly embed retrofit as a standard practice, we must learn from these challenges. This involves rethinking the funding application process to allow for greater flexibility and continuity, enabling landlords to plan and execute retrofit projects more effectively. By addressing these issues, we can start to break the boom-bust cycle and address some of the issues being faced within the supply chain.
Taking things forward into 2025, the hot topics I think we’ll see…
As we look ahead to 2025, several key trends are poised to shape the retrofit landscape, driven by technological advancements and regulatory changes. Here are some of the hot topics I expect to dominate the conversation:
Focus on supply chain delivery, quality and compliance
As landlords gear up to deliver their Wave 3 funding allocations and embark on larger-scale projects, addressing supply chain issues will undoubtedly be a major focus in 2025.
This will involve not only addressing the skill shortages but also fostering collaboration within the supply chain to maintain high standards and meet project timelines.
We are already hearing about enforcement actions against contractors who fail to adhere to PAS 2035 standards, and we know landlords are also concerned about not repeating the delays experienced in previous waves. Learning from these past challenges and increasing our focus on quality and consistency is essential to ensuring timely project completion within funding and PAS 2035 requirements. By focusing on these areas, we can make significant strides in embedding retrofit as a standard practice in the housing sector.
High-temperature heat pumps: a cost-effective solution?
Increasing amounts of emerging data suggest that overall the annual efficiency of high-temperature heat pumps may not be significantly less efficient than their low-temperature counterparts. The installation costs for high-temperature heat pumps are typically much lower, as they often don’t require extensive home modifications. In contrast, low-temperature systems frequently necessitate the replacement of existing radiators and distribution systems, significantly adding to the installation cost.
Given this emerging data on performance, the cost differential makes high-temperature heat pumps an attractive option for those looking to balance upfront investment with operational expenses.
Energy market reform: a new era of regulation and innovation
The energy market is on the cusp of significant reform, with Ofgem taking on the responsibility of regulating heat networks. In 2025, we can expect Ofgem to focus on how to effectively regulate this space, with an emphasis on tackling fuel poverty and ensuring warm homes for all. This regulatory shift will be a critical component of broader energy market reforms, which aim to evolve and mature the flexibility and demand within the grid.
At Sero, we are thrilled about the opportunities that 2025 holds. Our partnerships with forward-thinking landlords who share our passion for innovation and resident-centric decarbonisation are truly inspiring. Together, we are poised to drive fresh thinking and transformative change.
As we embark on this journey over the next year, I am confident that we will showcase how effective retrofitting can be achieved, sharing the learnings we’ve gained in 2024 to really tackle what needs to be done in 2025 and beyond. Our collaborative efforts will not only enhance the lives of residents but also address the sector's need for delivering at scale, whilst providing affordable and healthy homes. We are committed to making a real, tangible impact, setting new standards for the industry.
