Energy and Climate Change CommitteeWritten evidence submitted by the National Housing Federation

1.0 Executive Summary

1.1 We are the voice of affordable housing in England and believe that everyone should have the home they need at a price they can afford. Our members—housing associations—provide two and a half million homes for more than five million people.

1.2 Housing associations have an excellent track record on energy efficiency and have made significant strides in relation to the private sector over the last 10 years. However, with 600,000 social households in fuel poverty, there is an urgent need for more to be done.1 Housing associations are well placed to deliver further improvements at scale, provided the policy and funding framework permits it.

1.3 To ensure this happens we believe DECC should:

Track the cost and availability of Green Deal finance to ensure low income households most in need are not disproportionately excluded from access to affordable finance.

Track the tenure mix of Green Deal and other energy efficiency work supported by the Energy Company Obligation (ECO). This would aim to prevent predominantly low income and vulnerable social housing tenants from receiving a proportionally small amount of subsidised improvements, in return for their contributions to ECO through their bills.

Explore approaches to gathering data on household income. This would allow DECC to track the income distribution of households benefiting from ECO to assess the extent to which it is compensating for the regressive way it is financed. Only with this data will it be possible to see if the Green Deal and ECO are making things better, rather than worse, for low income and fuel poor residents.

1.4 We have provided further information on these points below, and would be happy to discuss them with the Committee.

2.0 What should be the key indicators for tracking the progress of the Green Deal?

2.1 Cost and availability of Green Deal finance

The success of Green Deal as an approach to financing energy efficiency work critically depends on the cost and availability of finance. The Green Deal Finance Company has recently revealed that there will need to be individual credit checks on households taking out Green Deal finance. While the Company has sought to reassure stakeholders that these will be “light touch” and appropriate (ie based on payment of utility bills rather than a standardised credit history), it will be very important to track whether finance is available to low income households and at what cost.

With this in mind, we suggest that DECC track:

the cost of finance;

the extent to which the cost varies according to household income; and

whether particular types of households are being disproportionately excluded from access to Green Deal finance.

2.2 Tenure of participants

The Federation welcomes Ministers’ frequent positive statements about the potential for social housing providers to deliver continued energy efficiency improvements through the Green Deal and ECO—in social housing and through cross-tenure neighbourhood schemes. The sector shares this positive view of its potential. However, energy efficiency improvements can only be delivered if affordable finance and ECO funding is available to the sector.

Research conducted by the Federation2 and pilot projects undertaken by housing associations suggest the ability of housing associations to undertake successful projects that make a real difference to residents without ECO subsidy will be limited. Many of the “low-hanging fruit” improvements have been undertaken, meaning that those that are left are likely to need subsidy to meet the golden rule. Additionally, with many residents on low income and/or in fuel poverty, taking a Green Deal charge may not always be appropriate or possible—again increasing the importance of access to ECO.

DECC’s modified proposals for ECO eligibility were very welcome—notably for the inclusion of non-standard cavity construction, and the creation of the Carbon Saving Communities Obligation. However, the decision to exclude social housing residents from Affordable Warmth ECO and the failure to introduce a distributional safeguard on Carbon Saving ECO remain significant barriers to access by the social housing sector. At present, there is also continued uncertainty about whether social housing landlords’ access to the ECO brokerage will be constrained.

For all these reasons, we consider it vital that the tenure mix of Green Deal and other energy efficiency work supported by ECO is tracked closely. We understand that DECC is minded to do this and we fully support this move. It would be profoundly unfair and regressive if predominantly low income social housing residents contribute to the cost of ECO through their bills but receive low levels of benefit in terms of subsidised improvements. As described above, it would also make it very difficult to get programmes off the ground without adequate access to subsidy.

2.3 Household income of participants

Professor John Hills’ recent review of fuel poverty3 highlighted the significant risk that funding energy efficiency measures through levy mechanisms could worsen fuel poverty if the benefits of these measures are not significantly biased towards low income households. It is therefore vital that DECC find ways to track the income distribution of households benefiting from ECO.

We understand that household income will not be an intrinsic part of data-gathering on ECO4, and that it would be undesirable to ask households for personal financial information. However, we suggest DECC could use other approaches (for example sample surveys) to ensure that there is some indicative evidence of household income of participants.

3.0 Conclusion

Due to the importance of subsidy in making schemes viable for social housing tenants and the need to mitigate the potentially regressive impacts of levy mechanisms for all those on a low income, it is vital that the tenure and income level of participants is monitored. Only with this data will it be possible to see if the Green Deal and ECO are making things better, rather than worse, for low income and fuel poor residents. The interaction of Green Deal finance with these groups also needs to be closely tracked to ensure it is not providing another significant barrier to access.

January 2013