Embedding Sustainability in Asset Management

Posted: 5th February 2024 Robert Hunt, Senior Strategic Asset Management Consultant

The housing sector is responsible for 18% of emissions across the UK economy. Of this 18%, 69% of emissions are generated from space heating, hot water and use of appliances.  If the UK are to achieve their net zero targets, most of the 25.1m homes in England will require retrofit. The challenge faced by the housing sector is significant, but as a sector we have a track record of rising to and meeting these challenges.

What are the challenges?

Landlords are faced with competing priorities, such as balancing existing investment requirements alongside building safety and compliance. These works must be delivered within a balanced 30-year business plan but recent high levels of inflation, particularly in the construction industry, and the aftermath of the 1% rent reduction have seen available budgets shrink.

“Embedding sustainability into asset management will require a change of approach from landlords.”

The worst performing social tenure properties need to achieve a minimum EPC band C by 2030.  Even though social housing is currently the most energy-efficient tenure, many properties still require improvement to align with this target, despite Decent Homes works. It is likely that these properties will now require a deeper retrofit to achieve the energy performance targets.

Furthermore, the UK’s energy-inefficient properties result in homes where damp and mould can thrive, air quality is low, and heating is expensive. As a result, residents are experiencing poor health and fuel poverty which has become an inherent issue across the sector.  To mitigate these issues, and avoid the unintended consequences of retrofit, a holistic approach to retrofit must be taken. However, this is generally more expensive in the short term.

What is the solution?

A corporately led agenda to align with

Sustainability, and in particular, retrofitting existing homes, should be seen as a corporate priority. Many local authorities have declared climate emergencies but in many cases this has yet to filter down to asset management strategies. Without a strategic target to aspire to and actively work towards, it is unlikely that landlords will drive the change that is needed. Ultimately, the drive to change must be set corporately.

Asset management strategies, when they are updated, must embed sustainability throughout the key activities of capital investment, repairs, voids, new development, and procurement. Resident consultation is important to understand not only the resident’s current issues but their future aspirations too. This is particularly important for topics such as electric vehicle charging requirements, bicycle storage solutions, and waste and recycling facilities. A single asset management strategy will not cover the period to 2050, but it should embed the vision of net zero carbon by that date and support effective decision-making to reduce whole life costs and avoid abortive works. Local targets will need to be set in short-, medium-, and long-term timescales and there should be key performance indicators to monitor and review performance.

Data driven decisions to target retrofit

Understanding the performance and characteristics of the existing stock is fundamental to prioritising where to start. Good quality asset data is vital to assessing which properties should be retrofitted first and to understanding the likely performance gains. EPC and SAP (standard assessment procedure) data is a great starting point, but stock condition data should be included too. In addition, understanding the geographical context of the stock using geo-spatial mapping software will identify clusters of properties that can make delivery more economical.

Plan in the context of the bigger picture

The immediate priority is to meet the 2030 EPC band C target, but landlords should question whether this is ambitious enough and if it is the most appropriate decision to achieve the strategic objectives. Assessing whether a two-stage (shallow then deep) or one-off (deep) retrofit will help determine which approach provides the best value for money within the 30-year business plan.

A word of warning if aiming for EPC band C, the SAP methodology is due to be updated imminently and historically this has seen ratings fall. This is important for current low scoring EPC band C properties that might slip into band D.

Don’t shy away from PAS 2035

The introduction of PAS 2035 has given a clearer structure to planning and delivering retrofit projects. Its stages are embedded in grant funding criteria and should be followed to ensure that performance targets are achieved. Properties are required to be assessed by Retrofit Assessors, and suitable works to be planned by a Retrofit Co-ordinator, providing clarity on what is required and estimates of cost. It is important that these costs are factored into 30-year business plans and capital delivery programmes. It is recommended that landlords start preparing for grant funding applications from the previous winter to create a robust bid.

Providing the supply chain with confidence in demand

Grant funding application deadlines and delivery timescales are often tight. Landlords should consider whether their existing contracts are able to undertake the pre-assessment and monitoring of the selected properties, and if they have the skills and supply chain to deliver the works. If not, then new contracts will likely need to be tendered. In this case, a longer-term procurement strategy may be necessary. In addition, the landlord will need to assess if they have the in-house skills and experience to manage the retrofit programme or if additional support is required.

Summary

Embedding sustainability into asset management will require a change of approach from landlords. The last 20 years have been focused on meeting and maintaining Decent Homes. Going forward, delivery will shift to archetypes, grouping geographically, delivering performance standards and driving efficiencies. 30-year business planning will need to adapt to this new approach.

This transition may seem like a daunting proposition for the housing sector. However, good quality retrofit can significantly improve the lives of residents and support the nation’s transition to net zero. Difficult decisions must be made but is it better to be proactive and face the challenge now rather than wait and face a much greater challenge as 2050 approaches.

To find out more please contact our team:

Robert Hunt, Senior Strategic Asset Management Consultant
robert.hunt@altairltd.co.uk

Annabel Gray, Director of Sustainability
annabel.gray@altairltd.co.uk

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