Housing associations can set a course to carbon zero

How housing associations can set a course to carbon zero

For the last 4 years most Property Services and Housing Directors have had the cladding crisis at the top of their agenda, demanding resources, attention and comprehensive fire and safety mitigation programmes. With these programmes mostly under way and Government requirements clear, management attention is now focused on energy usage and the problems it causes for many residents in terms of their personal fuel usage, on the escalating costs of combined heat and power systems and on demands to make buildings compliant with new energy use standards.

These themes dominated the recent Climate and Sustainability in Housing 2022 conference., which demonstrated that the climate issue is a major concern of Housing Associations, posing many challenges, including the need to meet EPC standards, the inflation affecting supply chains and an emerging skills gap. A theme throughout the conference was the need for collaboration across the housing sector and with external companies. With an estimated average cost of £25,000 to decarbonise a housing association home, key questions included “Who pays?” and “How do you track the programme and sustain it, given the huge effort and resources required?”

In our first blog, we identified that achieving big reductions in carbon usage required strategic planning, not just a little tampering with activity. This means understanding the fundamental characteristics of the materials and services used, how they are them together to make services and products, and how to increase or maintain value while reducing emissions.

These arguments apply with great force to housing in general, and more particularly to social housing. Homes account for over 20% of UK carbon emissions – the reason for the government’s tough 2035 target for housing. The sector will struggle to meet these targets. Further pressure comes from UK local authorities, around half of whom have declared a climate emergency. Meanwhile, the rise in demand for social housing, driven by the rise in house prices and lately by price inflation outpacing wage inflation and rising interest rates, is putting pressure on housing associations to build or acquire more dwellings, but these must be carbon neutral or better to enable housing associations to meet carbon reduction targets.

Housing associations are big direct users of energy in materials, whether for new build and repairs, while tenant usage is also high. As with all housing, the age of much social housing leads to high emissions, due to poor insulation, old appliances, and poor ventilation. When it comes to tenant well-being, extra pressures have been created by the recent rapid rise in energy costs, affecting tenants with lower incomes more severely, creating a serious problem of fuel poverty.

The good news is that many housing associations now focus more strongly on carbon reduction. This is partly in response to the strong move towards better ESG reporting and the importance of carbon in ESG measures. They must document their reductions clearly and use tougher carbon reduction strategies and measurement approaches to meet the demands of legislation and regulation, which will become tougher.

Because of their size and relative importance in the housing market, housing associations can do many things to reduce their carbon usage, whether through energy use (e.g. solar or wind energy, ground source heat pumps), as well as ensuring the use of greener sources of energy in their power contracts. The scale of their operations means that they can undertake strategic and cost-effective programmes of retro-fitting their estates to reduce carbon-emissions, particularly in relation to insulation and appliances. The UK government’s Social Housing Decarbonisation Fund is already helping housing associations improve in this area, with the first funding already allocated.

A win-win approach, benefitting the environment and tenants cost-effectively, must be central to strategy, but this will not be delivered by a “business as usual approach”. A deep retrofit is needed, with high overall costs. However, deep retrofit costs are high, so its planning and implementation must be underpinned by a measurement approach that allows comparison with best of class, not just in housing but throughout the economy. This is partly because of investor requirements. Private and public investors are needed to fund the growth in affordable housing.

Most investors interested in social housing have strong ESG commitments, perhaps because they are issuing green bonds to raise funding, or, as with pension funds (important long-term investors in social housing) because of their commitments to future pensioners. These investors want to see a greener approach in housing associations, one which can be compared with the approach of other sectors. This is one reason for the strong drive to improved ESG reporting in housing associations.

Housing associations have a good track record for measuring their social value and communicating it to investors. Now, they must extend this approach to environmental matters.

Many housing associations, particularly larger ones, have issued ESG reports. Many focus on Scope 1 emissions, but some include Scope 2. However, they must also focus on Scope 3 (in one association which reports it, nearly 10 times greater than Scope 1 and Scope 2). Housing associations must try to avoid the confusion created by a plethora of different measurement approaches.

So, in devising and implementing their carbon reduction strategies, housing associations should use criteria that allow comparison with best practice inside and outside their sector (i.e. not housing specific). EPCs are not enough. A measure is needed for the whole organisation, not just for dwellings. It must include Scope 3. The measurement method should allow continuous recalibration and forecasting and detailed comparability, so that action areas can be prioritised.

Housing associations have a duty to find the lowest cost methods of making changes, of planning and implementing actions. They cannot afford repeated detailed investigations by experts, such as consultants, who provide a report with long lists of suggestions as to how to improve ratings, without comparing them to other organisations. The measurement method must be cheap, repeatable, publicly comparable, enable internal governance (to avoid accusations of ‘greenwashing’). This requires a clear and agreed platform for making comparisons.

We have created that platform, using our experience of creating a clear basis for comparison between companies in other areas of management. You can read about how you can do it that quickly and efficiently, without consultants crawling all over you for weeks, here.

June 2022

Merlin Stone, Neil Woodcock, Richard Davis