Guide to Social Housing Decarbonisation Fund: Wave 3

The third wave of the Social Housing Decarbonisation Fund is designed to fund energy improvements in social housing throughout England. Guidelines laid out for the third wave differ from previous iterations, offering multiple application routes and new incentives. Understanding the funding and application routes available  is important for potential applicants who could benefit from this latest wave. Applications open in September 2024, so as a landlord housing developer it’s time to prepare plans to access funding.

What is the Social Housing Decarbonisation Fund?

The Social Housing Decarbonisation Fund (SHDF) has been established to provide, and upgrade existing, social housing with higher levels of energy efficiency. The fund will support the installation of energy performance measures with the goal of making warm, efficient homes accessible to all. The government has allocated £6bn to introduce energy efficiency measures, with an additional £1.5bn dedicated to the Social Housing Decarbonisation Fund. 

The fund helps landlords and local authorities by providing financial aid to social houses that comply with the application’s stipulations. There have been multiple phases of the SHDF across the UK. Initially, 2,000 homes were upgraded to at least Energy Performance Certificate (EPC) band C. Later phases focused on insulation and retrofitting. The SHDF aims to create warm, efficient homes, reduce fuel poverty and improve residents’ comfort and health. The latest round provides £1.2 billion in combination with co-funding from landlords, to improve at least 140,000 social homes to EPC band C or above.

Key takeaways from SHDF Wave 3 draft guidance

Applications for the third wave of SHDF open in Summer 2024, with the Department of Energy Security and Net Zero (DESNZ) encouraging landlords to begin preparing how they will access funding. Unlike previous waves of funding which have operated with a “one-size-fits-all” policy, wave 3 has two different funding application routes, dependent on specific criteria:Challenger Fund and Strategic Partnerships. The delivery window for the third wave of the SHDF extends until September 2028, with the deadline to spend the fund in March 2028. 

Wave 3 has been broken up into phases to make it easier for applicants to manage each stage. The funding itself will be drawn down on a phased basis, meaning landlords will only have to provide detailed information on relevant properties and associated works to the DESNZ at the point each phase commences. This gives landlords a greater understanding of the process when commencing each phase, more time to liaise with contractors, get tenant consents, and complete retrofit assessments. 

Eligibility for the fund is defined by a range of factors. All existing social housing with current EPC C or below ratings are eligible for funding, and homes retrofitted during the second wave of SHDF are not eligible. Wave 3 of the SHDF has a cost cap of £7,500 per home. Alongside the government-provided funding, applicants must provide a minimum of 50% in co funding. 

One significant change to the previous rounds of funding is the removal of the fabric-first approach. However, landlords are still required to comply with PAS 2035 requirements which emphasise the continued importance of fabric measures to address issues such as dampness, mould and condensation. 

Who is eligible for the social housing decarbonisation fund?

The third wave of SHDF funding is open to various entities including local authorities, combined authorities, registered social housing providers and registered charities owning social housing. Wave 3 applicants must include a minimum of 100 eligible social housing properties (rated EPC band D-G) per bid. Smaller landlords who own or manage fewer than 100 homes, are expected to try to reach the 100 home threshold, but will still be eligible if unable to do so. If not possible, it is strongly recommended that smaller landlords consider joining a consortium. Landlords may choose to lead or join a consortium as a member. Strategic Partnerships are expected to propose larger scale projects than those who choose the Challenger Fund route. Homes at or above EPC band C can still be eligible for Wave 3 SHDF funding. Properties on or above EPC band C in a block or terrace are still eligible if the fund enables effective works on adjacent social housing (below EPC band C). 

Funding options and routes

The third wave of the SHDF differs from previous waves by introducing two possible application routes: the Challenge Fund and the Strategic Partnerships routes. 

The Challenge Fund is likely to be the go-to route for the vast majority of landlords and applicants, with the Strategic Partnerships route only available to applicants with a proven track record of successful implementation at scale. The process for the Challenge Fund is not a competitive process, so all applications that meet the minimum criteria will be awarded funding. 

The Strategic Partnerships pathway is geared towards a smaller number of recipients, specifically suited to applicants with a proven track record of delivering to scale (thousands of properties). As they will be working across a larger portfolio of properties, applicants within the Strategic Partnerships pathway will not be expected to provide detail on specific homes and measures until works are completed, with findings drawn from routine delivery monitoring. This route is open to both individual and consortium applicants. 

Benefits of integrating advanced ventilation solutions

Integrating ventilation solutions into social housing plays a key role in ensuring that properties meet the criteria for the Social Housing Decarbonisation Fund. Ventilation helps to improve indoor air quality, remove pollutants and controls moisture and humidity. Since the goal of the SHDF is to improve the overall energy efficiency of social housing, integrating efficient ventilation solutions is a great way to improve the living standards of tenants who for years have been impacted physically and financially by damp and mould in their homes. Ventilation options can include intermittent extractor fans and continuous running extractor fans designed to improve airflow with minimal noise and maximum efficiency, and residential mechanical heat recovery systems, providing essential ventilation and saving energy through intelligent heat recovery. 

As well as ventilation options, the new wave of SHDF also has financial incentives to install low-carbon heating systems. Up to 10% of homes in an application can access an additional £20,000 in funding per home for the installation of low-carbon heating. Eligible systems include air source heat pumps, ground source heat pumps, heat networks and shared ground loops. 

How Airflow can help

Airflow’s expertly designed ventilation systems help to protect tenant’s health whilst improving the fabric of your buildings. Our social housing ventilation solutions are highly effective at improving air quality and increasing efficiency in line with the latest SHDF funding criteria. Our range of solutions includes intermittent and constant running extractor fans, as well as heat recovery ventilation and retro-ducting systems. Our team of knowledgeable technicians are on hand to provide support throughout the selection process, making your journey through the funding applications process as simple and easy as possible. To find out more about how our integrated ventilation systems have improved the standard of living and energy efficiency in homes across the UK, take a look at our case studies.