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Written Evidence Submitted by Northern Housing Consortium

August 2020

About the Northern Housing Consortium

The Northern Housing Consortium (NHC) is a membership organisation based in the North of England. We are the ‘Voice of Housing in the North’ working with local authorities, housing associations and ALMOs. Our membership covers over 90% of all social housing providers in the North. The NHC’s vision is to use our collective voice to have unrivalled influence in achieving housing policy that works for the North and provide outstanding services that support our members to create great places to live.

The NHC’s 140 full members are involved in all aspects of the North’s housing markets – from strategy to delivery of new homes; and of course, in the ownership, management and maintenance of many of our existing homes. Our work supports economic output of over £10bn and we support over 100,000 jobs across the North[1].

As anchor institutions within their communities, our members have a long and successful history of supporting their tenants and residents into skills development and employment opportunities. They do this because they are socially-purposed organisations and because it makes sound economic sense for them to do so.

We have focused our evidence in response to one of the Committee’s key questions:

“How can any fiscal and economic stimulus packages be aligned with the UKs ambitions on net-zero, biodiversity, the circular economy, and Sustainable Development Goals?”

Aligning the post-Covid economic recovery with the UK’s ambitions on net zero:

It is imperative that climate change mitigation is central to post-Covid economic recovery; addressing current economic challenges through green investment offers the Government a huge opportunity to deliver on the UK’s climate goals.

At the Northern Housing Consortium, we are clear that the housing sector in the North provides the Government an ideal arena in which to align their post-Covid recovery plans with their net zero and levelling-up ambitions. We propose that aligning post-Covid economic stimulus with the target of net zero by 2050 is not only necessary but can be achieved through investing in the North’s existing homes and building new homes in the North.

Housing has been at the heart of the global Covid-19 experience, and issues around unsuitable and non-decent homes have been intensified for many throughout the lockdown period. A comprehensive programme of improving existing homes in the North to increase standards of energy efficiency would not only reduce carbon emissions and improve living standards, but also create new skills and employment opportunities in the region. Therefore, the labour-intensive nature of improving the energy performance of the North’s housing stock will advance the UK’s target of net zero and contribute to the economic recovery of the North.

The publication by BEIS this month of further detail on the Green Homes Grant scheme, announced by the Chancellor at the Summer Economic Statement, is a welcome development but we urge Government to open up the full £3.8bn Social Housing Decarbonisation Fund outlined in the Conservative Manifesto to enable social housing providers to invest at scale.

We also welcome the Government’s commitment to ‘Build Build Build’ in response to the economic challenges the UK now faces. This approach can offer the North an opportunity to embrace innovative and sustainable methods of building new homes while stimulating local economies through supply chains and creating new, green jobs. This will also contribute to the Government’s commitment to all new homes being ‘zero carbon ready’ as outlined in the Planning White Paper published this month.

Investing in the North’s existing homes and building new homes in the North would align the Government’s priorities for post-Covid economic recovery and reaching net zero by 2050.

These two recommendations to Government to align these goals have been set out in more detail below:

Advancing towards net zero by investing in the North’s existing homes:

‘Levelling-up’ the regions

The North’s existing homes are older and colder than the English average.  One in four of our homes were built pre-1919[2], and 833,000 households across the North live in fuel poverty[3]. A quarter of all carbon emissions across the North are from our existing homes[4]. We know that a very significant element of this is down to older private sector homes that are energy inefficient or in disrepair – the average carbon output from our pre-1919 homes is around 7.2 tonnes, compared to around 3.6 tonnes from post-1990 properties[5].

Reaching net zero is highly aligned with local strategy. Over 60 of the North’s local authorities have now declared climate emergencies. Clean growth is at the heart of the Greater Manchester Industrial Strategy[6] – the North’s first – which includes an ambitious net zero target of 2038. Other city regions are adopting similarly ambitious measures[7]. Focusing stimulus activity on net zero isn’t a short-term expedient – it’s about accelerating long-term strategy.

Skills and Employment in the North

Upgrading our homes towards net zero can create a significant number of new jobs. As the Committee on Climate Change have noted in their advice to the Prime Minister, retrofit is by its nature a labour-intensive activity[8]. 

New modelling by the Energy Efficiency Infrastructure Group, 2030 suggests that improving all homes in the North to EPC C by 2030 would require a total of 38,100 full-time equivalent jobs[9].  Previous modelling has suggested that – even at a steadier rate of implementation – improving homes to EPC C could create an additional 20,000 jobs per year in the North[10].

The NHC is working with IPPR North to understand better the skills and training pathways needed to ready Northerners for these roles – we would be happy to share findings from this work in the Autumn.

Economic Impact

The scale of the retrofit opportunity is huge. It is estimated that over the next ten years, £27.47bn will need to be invested (from all sources, public and private) to upgrade all the North’s homes to EPC C by 2030[11].  Stimulating and accelerating this investment now – at a time when interest rates are at record lows, and labour availability is high – makes good sense.

In considering Covid-19 fiscal recovery, the University of Oxford’s Smith School have identified building efficiency retrofits as one of five policies with high potential both on economic multiplier and climate impact metrics[12]. 

The Cost Benefit Ratio (Value for Money) indicator for a programme of housing retrofit is estimated at 2.27:1 which classifies the programme as “high” Value for Money.

The returns to GDP are estimated at £3.20 per £1 invested by Government[13]. Upgrading homes will produce ongoing energy bill savings – cash in the pockets of those living in the homes concerned. These savings are estimated at £270 per household per year, or £1.79bn per year across the North if all homes were brought up to EPC C[14].

Delivery mechanism 

The social housing sector in England expects to invest £2.2bn[15] on capitalised repairs and maintenance of existing homes in this financial year. Councils and housing associations are skilled asset managers, and many organisations have inhouse repairs and maintenance functions. Previous research for the NHC[16] has shown that ¾ of expenditure by housing organisations in the North is with suppliers based within the North, supporting local jobs and supply chains. This combination of factors makes housing organisations the ideal delivery mechanism for an initial wave of net zero compatible investment.

Indeed, the BEIS Select Committee recommended last year in the report on Energy Efficiency[17] that Government ‘acts with urgency to set out a trajectory and policy framework for the [social rented] tenure’, and that social housing should ‘lead the way’ in terms of energy efficiency. One year on, and no such framework has emerged.

Yet the opportunity exists to use the £3.8bn Social Housing Decarbonisation Fund (SHDF) pledged in the Conservative Manifesto to invest at scale and pace. A priority should be an intensive programme of fabric-first improvements like additional insultation. Given the concentrations of ownership in the social sector, this can be delivered efficiently and effectively on a neighbourhood basis. The £50m announced at the Summer Economic Update for pilots in the social sector is disappointing, given the ambition which exists in the sector.

The SHDF could also be used to bridge the additional costs of net zero: for example meeting the higher costs of switching to low-carbon heat sources (like heat pumps) rather than replacing gas boilers like-for-like. Using the fund in this way – with social housing ‘leading the way’ in the manner the Committee recommended - would enable the establishment of reliable supply chains and ramp up demand, lowering the cost of these components in the longer run for the social and private sectors. In this way, the SHDF can complement the Green Home Grant vouchers already announced by the Chancellor.

Coordinated investment in social sector homes by government and housing organisations is a proven model. During the last recession, the Decent Homes programme (a coordinated investment of £37bn over a decade[18]) delivered significant economic stimulus. 

The Government has already committed to a £1.5bn Green Home Grant voucher scheme for the owner-occupied sector and landlords, and a £500m Local Authority Delivery (LAD) scheme to support with the cost of home energy improvement measures. The LAD scheme aims to target low-EPC and low-income households in all tenure types. These are welcome announcements and we are pleased to see that local authorities have been identified as key delivery mechanisms for the scheme. But to fully align the post-Covid economic recovery and the UK’s target of net zero by 2050, the Government must harness the scale and strength of the social housing sector by confirming the full £3.8bn allocation to the Social Housing Decarbonisation Fund as soon as possible.

New homes to meet the needs of a green, levelled-up region:

As well as investing in our existing homes, the North needs new, energy efficient homes. Delivery of new homes in the North has not kept pace with household growth in recent years, let alone the kind of household growth that may emerge from our future economic growth scenarios, or from a new labour market where home-working means geographical location is more flexible and quality-of-life considerations come to the fore.

Building new affordable, sustainable homes in the North, and readying sites for future development, has significant immediate stimulus potential – and can deliver on Government’s priorities around sustainability, levelling-up and its new homes target.

Supporting the affordable housing sector to provide counter-cyclical stimulus

MHCLG reported last year that between July and September 2019, 81% of new properties were given an EPC rating of A or B[19], whereas 43% of existing homes were given a D rating in the same period. This proportion of D rated homes is well below the target to get as many homes as possible to at least band C by 2035, as set out in the Clean Growth Strategy. The growth of new, energy efficient housing in the North’s social housing sector would ensure that long-term carbon emissions from domestic buildings remain low, as well as further stimulating the economy.

At the Budget in March 2020, the Chancellor of the Exchequer announced £12.2bn for the Affordable Homes Programme (AHP). The Prime Minister has since confirmed this funding, but no details have yet emerged on how the programme will operate, or the tenures it will support. As always, every single pound of government funding from this programme will be more than matched with resources from housing organisations: as the Regulator of Social Housing noted in May, the sector remains financially strong[20].

In recent years, Government and Homes England have taken welcome steps to provide more long-term certainty for registered providers who benefit from AHP funding. However, the lack of detail on how the new programme will operate creates uncertainty in the sector and mitigates against the kind of decisive, long-term action we need at a time like this. We recommend that Government should open the new Affordable Homes Programme with immediate effect and do so in a way that maximises its flexibility.

For example, giving all registered providers flexibility over the tenure of the homes they build would de-risk development and provide confidence that new homes can be occupied, regardless of the condition of the shared ownership or outright sales market at the point of completion. Forward funding development would similarly de-risk complex and mixed tenure sites. The Letwin Review[21] illustrated the limitations of a focus on a single type or tenure of home. There is an absorption rate for home ownership products, and in uncertain economic times, it is likely this absorption rate will slow. The North’s housing sector has a track-record of developing a market for shared ownership and rent-to-buy products. At this point in time, it is important to maximise the economic impact of the new Affordable Homes Programme by ensuring the tenure mix is as flexible as possible.

1/3 of Homes England affordable housing completions occur in the North of England[22]. NHC members are keen to do even more, and align these ambitions with their climate action plans. Registered providers have traditionally provided a powerful counter-cyclical stimulus, keeping construction going during downturns, avoiding the permanent loss of capacity and skills. Bringing forward this key fund will enable housing associations and councils in the North to perform this important role and to continue making their valuable contribution to housing supply.

The economic stimulus effect of building new homes is well documented. For every £1 spent on construction, the UK economy benefits by £2.84[23]. Construction is by its nature a labour-intensive and localised process, with relatively low levels of imports. 

This effect is well-proven over previous recessions, with housing construction accounting for 1/3 of the increase in GDP as the UK emerged from the double-dip recession of the early 1930s[24].

The recent announcement by the Secretary of State for Housing, Communities and Local Government to extend the period for local authorities and housing associations to start building under the Affordable Housing Programme by one year is welcome. But bringing forward the new Affordable Homes Programme, with potential flexibilities on tenure and delivery is a high priority for our members, has also been backed by the Local Government Association and National Housing Federation.

An opportunity to support green innovation

Many NHC members are looking to adopt precision-manufactured Modern Methods of Construction (MMC) with entire homes, or significant elements of them, constructed off-site. MMC is consistent with the ambitions of the 2017 Housing White Paper and the current Homes England strategic plan, with a focus on increasing construction productivity which will become even more important if social distancing reduces the productivity of traditional build methods further. 

The HCLG Committee published a report last year on Modern Methods of Construction and noted its ability to reach exceptional standards of energy efficiency, reporting that MMC homes use 20-30% less energy to heat than homes built entirely on-site[25]. This will not only reduce emissions from the domestic built environment, but also reduce living costs for households. Utilising MMC can also improve the sustainability of the construction process as it has the potential to make the transition from resource-intensive materials to renewable/recycled materials, reduce the use and transport of heavy goods vehicles to individual sites, and it concentrates building activity within a factory environment therefore reduces the necessity for operatives to travel across the region.

The number of large MMC production facilities located in the North, together with a significant proportion of the country’s construction product supply chain led to the emerging specialism being recognised by Government in the ‘Construction Corridor’ initiative launched by the previous Housing Minister[26], and endorsed by her successor at a recent NHC webinar. The NHC is working with our members to aggregate demand for MMC to generate supply chain confidence, reduce costs and reduce carbon emissions linked to traditional building methods. This approach will lead to a significant increase in green jobs in the North of England.

Delivering on the Sustainable Development Goals

Aligning the Government’s priorities on post-Covid recovery and reaching net zero by 2050 through investing in the North’s existing homes and building new homes in the North will contribute to the implementation of Goal 9 of the Sustainable Development Goals to ‘Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation’. Investment in the North’s existing housing stock and commitment to MMC in newbuild would develop the resilience of homes in the region, as well fostering innovative and sustainable methods through the harnessing of new technologies.

These recommendations would also help to deliver on Goal 11 to ‘Make cities and human settlements inclusive, safe, resilient and sustainable’ as communities across the North benefit from an improved social housing offer through increased home energy performance standards in both existing and new dwellings. Housing plays a significant role in ‘levelling up’ and in reaching net zero, it is vital that this is reflected in the national post-Covid recovery strategy to guarantee the development of resilient and sustainable communities in the North.

For further information about this submission please contact:

Brian Robson, Executive Director (Policy and Public Affairs)