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Submission from the Existing Home Alliance Scotland - 25 November 2021

Evidence Submission from the Existing Home Alliance Scotland on the Retrofitting of Existing Homes - 25 November 2021

INTRODUCTION

The Existing Homes Alliance Scotland (EHA) (The Existing Homes Alliance is a coalition of housing, environmental, fuel poverty, consumer and industry organisations calling for urgent action to transform Scotland’s existing homes. This submission represents the consensus view of the EHA though individual organisations’ views may differ slightly on finer policy details) welcomes the opportunity to give evidence to the Local Government, Housing and Planning Committee on the retrofitting of existing homes.

Heating accounts for around 50% of Scotland’s energy use (Scottish Energy Strategy, Scottish Government, December 2017 (p 18/19) and to cut greenhouse gas emissions we know we must move away from fossil fuel to low or zero carbon heating systems. We also need to reduce how much energy we use to heat our homes by making them as energy efficient as possible. Investing in the fabric of our homes not only helps us to reduce emissions, but it can also protect us from the kind of sudden energy price rises we have witnessed recently.

The Scottish Government published its Heat in Buildings Strategy (HBS) in October 2021, and as it develops the regulatory, delivery and financial framework needed to take it forward, we believe it must be focused on:

• Giving clear signals to homeowners and landlords about what they need to do by when to meet mandatory standards that will deliver warm, green and healthy homes.
• Expanding advice and support services to ensure clear and appealing customer journeys for homeowners (including private landlords).
• Targeting public investment to leverage private finance, deliver a just transition and ensure costs are met in full for people in fuel poverty.
• Monitoring outcomes of policy interventions to ensure sufficient progress is being made towards meeting climate change and fuel poverty targets.

The HBS estimates that it is likely to cost at least £33 billion to transform Scotland’s homes and buildings. This cannot all come from the public purse, but with the right package of policies and regulation, there is an opportunity to attract green investment into large scale retrofit programmes and low carbon schemes, supporting recovery and creating green jobs.

ADEQUACY OF SCOTTISH GOVERNMENT’S VISION

We fully support the vision set out in the Heat in Buildings Strategy (HBS), that “by 2045 our homes and buildings are cleaner, greener and easier to heat, with our homes and buildings no longer contributing to climate change, as part of the wider just transition to net zero.

The EHA also supports much of that pathway set out in the HBS – we believe it paves the way to providing warmer, healthier homes and will help us to meet climate change targets. Indeed, the Strategy includes a number of recommendations from our own report, Pathway to zero carbon homes by 2045, published in September 2019.

We welcome the recognition that reducing energy demand is essential for all properties. A ‘whole house retrofit’ approach is more cost-effective than undertaking multiple interventions over time and reduces disruption to households.

We welcome many specific commitments in the pathway to decarbonising heat, however, we have concerns about the timescales and adequacy of resources to develop and implement programmes in a way that meets climate change and fuel poverty targets and delivers a just transition.

We believe the following areas need to be strengthened:

National and Regional Strategic Leadership – Local Heat and Energy Efficiency Strategies (LHEES) will have a central role to play in shaping how we transition to net zero. We must ensure that local authorities and the emerging National Energy Agency (NEA) have the funding and skills needed to drive the transformation and provide strategic leadership at a local and national level.

We believe the preparation of LHEES should be a statutory duty and local authorities should be encouraged to implement them as soon as possible, with those that are ready to go being implemented from now.

Support for delivery of heat networks – Heat networks will be a fundamental part of Scotland’s transition to net zero and a number of critical gaps must be addressed to ensure effective deployment. These include skills gaps, insufficient access to information and guidance for consumers, lack of a common procurement framework and insufficient funding to de-risk new projects and extensions to existing projects. We believe a central Heat Networks Accelerator delivery team should be established to support the scoping and development of heat networks at a local level.

From 2025 all private housing must achieve minimum standards equivalent to EPC C at key trigger points - Whilst we very much welcome this commitment, we believe that the backstop date for owner-occupied homes should be brought forward from 2033 to 2030.

The HBS states that the standard will only apply where it is “technically feasible and costs-effective to do so”. Whilst we must be realistic about the scale of investment needed and how that relates to the value of the home, the Scottish Government must ensure that the cost-effective exclusion is designed to be used sparingly and not used as a get-out. There is a risk that, by focusing on financial payback, cost-effectiveness might not consider wellbeing benefits such as improved comfort and health outcomes. We recommend that cost-effectiveness is not used as an exclusion, but rather a trigger for additional support, where appropriate.

We also believe that holiday lets must also be covered by these regulations and be required to meet the same requirements as private housing. Otherwise some property owners may be tempted to put their property in the holiday lets market to avoid regulation, exacerbating the shortage of housing, particularly for rent.

Mixed-tenure buildings should meet EPC C equivalent and install zero emissions heating by 2040-45 - Whilst we recognise the challenges of improving mixed-tenure buildings, we are concerned that this late backstop date will result in people living in flats being left behind - over a third of Scottish households live in flats. The recently published Fuel Poverty Strategy states that households living in flats are at a higher risk of being in fuel poverty.

The Housing to 2040 strategy stated that the Scottish Government “would act on the recommendations” of the Scottish Parliamentary Working Group on Tenement Maintenance and, whilst we recognise the challenges associated with introducing such legislation, we believe that the timetable for the report from the Scottish Law Commission on the recommendations should be accelerated so the Scottish Government can begin to work on their findings (we suggest initial findings by 2022 at the latest).

HOW CAN RETROFIT BE DELIVERED IN A WAY CONSISTENT WITH A JUST TRANSITION

We welcome the fact that the Scottish Government has taken on board the recommendations of the Just Transition Commission and that the HBS places a strong focus on ensuring no-one is left behind.

The final report of the Just Transition Commission  made clear there are genuine opportunities available from improving the energy efficiency of existing homes. There are multiple benefits that can be delivered in terms of supporting or creating jobs, improving health and wellbeing outcomes, tackling fuel poverty, and reducing emissions. By reviewing existing programmes and supporting the most vulnerable so that they are engaged in the transition, the Scottish Government’s ambitions will align with the Commission’s view that achieving a good level of energy efficiency in the majority of Scotland’s homes is a prime example of a just transition in action.

Clear Fuel Poverty Strategy Routemap - The recently published Fuel Poverty Strategy (FPS) is intended to set out a pathway to achieving Scotland’s statutory fuel poverty targets. We feel more attention must be given in this strategy to urgent actions needed to meet interim targets, particularly the 2030 target that no more than 15% of households should be in fuel poverty and no more than 5% in extreme fuel poverty. The FPS must clearly set out the detail – in terms of programmes and policies linked to outputs and firm timetables, for how all four drivers of fuel poverty (including energy efficiency) will be tackled in Scotland.

Scale up Energy Efficiency and Fuel Poverty programmes - Existing fuel poverty programmes provide a great starting point. These are models that work well but could do much more to transform Scotland’s homes and tackle fuel poverty. We believe these programmes must be scaled up significantly over the rest of this parliamentary term.

There should also be targeted support for the household types and property archetypes most likely to need financial support for the transition to net zero – for example, we know that 43% of households using electric heating are fuel poor.

Effective scrutiny and oversight at a national level - We also believe that the FPS should be overseen with a cross-portfolio approach by ministers, including housing, energy and health, and based on the advice of the independent Fuel Poverty Advisory Panel – we are concerned that this panel is yet to get underway and believe that its membership must reflect the expertise needed to address the scale of the challenge.

The new National Public Energy Agency should have an oversight role to ensure energy efficiency and heat decarbonisation programmes are delivering the objectives of the fuel poverty strategy.

SUPPORT FOR HOMEOWNERS AND PRIVATE LANDLORDS

Targeted public funding to leverage private investment - The vast majority (76%) of Scotland’s homes are in the private sector – 62% owner occupied and 14% private rented. Given the scale of investment required to retrofit homes in the private sector, public funding must be used wisely. By using regulation to provide policy certainty, combined with incentives for early action, public resources can be used effectively to attract private sector investment – from individual homeowners as well as institutional investors. The EHA is currently developing detailed proposals for the fair regulation of owner-occupied housing in Scotland to be published in February 2022.

A range of financing mechanisms - Alongside requiring homeowners to meet minimum standards through regulation, there needs to be a range of financial incentives to encourage early investment by homeowners. We believe that expanding loans and cashback schemes should be a priority, and we welcome the establishing of a Green Heat Finance Taskforce and suggest that innovative models such as collective purchase, Heat as a Service, community asset ownership and third party ownership are explored.

The Scottish Government must ensure that mechanisms to support retrofit of private rented properties and agricultural tenancies include appropriate safeguards for tenants, to reduce the risk of significant rent increases or “renoviction” as homes are being upgraded.

Clear and attractive customer journey - To ensure a just transition to net zero we need to make it easy for everyone to be part of that transition. If homeowners (whether owner occupiers or private landlords) are to be encouraged to invest in retrofitting their homes, the process for accessing advice and support must be easy. The EHA is undertaking research to develop a set of exemplar customer journeys. We will share the findings of this work with the Scottish Government early in 2022 and hope that it will inform the development of the framework for implementing the HBS.

The customer journeys for retrofit must make sense and be appealing to homeowners. An expanded programme of advice and support should include:

National and local awareness and engagement campaigns;

• Effective signposting to Home Energy Scotland and its partnership network;
• Information and advice tailored to the homeowner/landlord/tenant;
• Referrals to fuel poverty programmes where appropriate;
• Access to ‘hand-holding’ services which could be offered for a fee;
• Support to find qualified installers and clear information about rights under a consumer protection scheme.

Assurance Framework - We welcome the HBS commitment to adopt PAS 2035/30 standards as this will help to provide quality assurance for homeowners, however this must be part of a wider assurance framework, including the use of the UK Government endorsed TrustMark, information on redress and adequate funding for Trading Standards for awareness raising and enforcement.

It is important that any new consumer protection and assurance framework does not create duplication and must be developed in partnership with supply chains to ensure SMEs are not disadvantaged.

Digital Home Log-book - The EHA believes that homeowners need to better understand their homes and how effective maintenance can improve energy efficiency and reduce emissions. Recently the Green Finance Institute has identified that logbooks have an important role to play in supporting retrofit planning .

FUNDING FOR THE SOCIAL HOUSING SECTOR

The Zero Emissions in Social Housing Taskforce (ZEST) report sets out some of the challenges facing the social housing sector and includes key recommendations on the support required if the sector is to achieve the ambitions set out in the HBS.

Early Review of Standards - The current target is for social housing homes to meet EPC B by 2032, although the sector has raised concerns about the lack of alignment between this target and net zero objectives. ZEST recommended that the planned review of EESSH2 to brought forward to commence immediately with a final decision on the revised approach and implementation no later than 2023. This would help to give greater certainty on the long-term targets for the sector.

Long term, non-competitive funding - The ZEST report identifies that social landlords are experiencing a number of financial challenges due to the cumulative impact of a range of regulatory requirements, along with rising costs of materials and labour. There is concern that increasing capital investment costs could put pressure on rent affordability. Although some funding options are currently available to social landlords, including the Social Housing Net Zero Heat Fund, the ZEST group has called for a sector capacity assessment to be commissioned as the first step in developing a longer term, non-competitive grant fund which can be distributed fairly across the sector based on need. This would assist social landlords in long-term planning and strategy development.

WORKFORCE AND SUPPLY CHAIN CAPACITY

Certainty - To meet the growing demand arising from increased awareness and expanded advice and support services, we must ensure that our supply chains are ready to respond. SMEs need policy certainty to invest in training and refocusing their businesses to retrofit and heat decarbonisation. This should be provided through a clear regulatory framework. But in addition, longer term strategic partnerships between delivery bodies/supply chains and local authorities should be explored to enable more strategic approaches and wider community benefits.

Practical support for reshaping businesses - Existing grant programmes should be built upon, ensuring all relevant trades can access the support they need. But grant funding alone is not enough – SMEs need assistance to refocus their businesses. This could be through a handholding type service to support accessing financial and other support services.

Investing in Retrofit Coordinators - With the adoption of PAS 2035/30, there will be a significant demand for ‘retrofit coordinators’, and it is vital that these roles are seen as independent, giving assurance to homeowners.

HOMES IN RURAL AREAS

The Scottish Government is committed to “additional support for rural and islands homes which require bespoke and targeted advice”.

Rural Homes Just Transition Package - With our rural communities facing some of the highest rates of fuel poverty, many more ‘expensive to treat’ homes, and an expectation to move quickly towards low carbon heating, we recommend that a Rural Homes Just Transition Package of advice and support is developed which recognises the distinct challenges and opportunities in rural, remote and island communities.

Support for agricultural tenancies – To ensure people living in agricultural tenancies are not left behind and to minimise the risk of owners selling properties rather than investing in meeting new standards (and these rural homes potentially being lost to local communities), we believe there must be a targeted campaign to ensure landowners are aware of the financial and practical assistance available to improve homes.

RETROFITTING FLATS

A key barrier to retrofitting flats is the legal complexities around maintenance and improvement of shared areas.

The EHA believes that the Scottish Law Commission’s work to respond to the recommendations of the Scottish Parliamentary Working Group on Tenement Maintenance (introduction of legislation that would require tenement owners to establish owners association, set up building reserve funds and carry out five yearly building surveys) should be adequately resourced so that it can make recommendations in 2022.

CONCLUSION

The Scottish Government’s ambitions and increasing funding for energy efficiency and zero carbon heating are welcome and critical to addressing the climate emergency and fuel poverty. But to upgrade a million homes by 2030 we need to go further, building on excellent existing programmes and investing in the innovation and skills that are needed to make it a reality.

The key areas where we feel plans for retrofitting homes needs to go further are:

• Accelerate the timescales for regulation to enable us to meet the 2030 target, specifically bringing forward backstops for owner occupied and mixed tenure homes.
• Increase investment to leverage private finance, deliver a just transition and ensure costs are met in full for people in fuel poverty.
• Expand advice and support services to ensure clear and appealing customer journeys for homeowners.
• Develop robust consumer protection in partnership with supply chains to ensure high quality work, consumer confidence and redress when things go wrong.

Given the scale of investment needed, it is clear that this cannot come from the public purse alone.  Public resources must be used wisely, targeting support to those who need it most and leveraging private finance through a range of financial incentives.