Guidance for Social Housing Decarbonisation Fund (SHDF) Wave 3 Marks Significant Progress Towards Net Zero
The recent release of draft guidance for the third wave of the Social Housing Decarbonisation Fund (SHDF) signifies another crucial step forward in the UK’s journey to achieve net-zero emissions. The new draft specification reflects notable improvements from the previous two waves, demonstrating that the feedback provided by the sector has been carefully considered and integrated.
Although applications for Wave 3 are not yet open, the Department for Energy Security and Net Zero (DESNZ) is encouraging potential applicants to begin their preparations as early as possible. So, what do landlords need to know about Wave 3?
Time is of the Essence
SHDF Wave 3 projects are expected to be completed by 30 September 2028, but all grant funding must be allocated and spent by 31 March 2028. For the final six months of the scheme, only co-funding can be utilized. Moreover, 40% of the grant funding must be spent in the first year, making it essential for landlords to plan their procurement strategies carefully and act quickly.
The draft guidance also specifies that grant funding must be spent in the year it is allocated, underscoring the need for a well-organized and coordinated approach. Drawing on our nationwide experience from the first two waves, we are ready to assist organizations in navigating these challenging timelines.
New Rules for Large and Small Bidders
Wave 3 introduces a new "Strategic Partnerships" route, which will allow a select group of recipients with a proven track record to deliver large-scale upgrades with reduced bureaucracy. Our work with combined authorities has demonstrated the benefits of large-scale delivery, and with new Mayoralties and strategic partnerships emerging, there will be more opportunities for collaboration.
For the first time, smaller landlords managing fewer than 1,000 homes will be able to apply for funding for fewer than 100 homes, with no minimum application size. However, the guidance encourages these landlords to aim for 100 homes or join a consortium if that target is not achievable.
We recognize that bidding for funding through this pathway may seem daunting for smaller organizations. At Procure Plus, we have decades of experience bringing landlords together to enjoy the benefits of operating at scale, and we see SHDF Wave 3 as a vital opportunity for smaller landlords to address some of their most challenging properties and deliver tangible benefits for residents.
Introduction of a New Cost Cap
Wave 3 also introduces a standardized cost cap for energy efficiency measures, replacing the previous approach where the cap varied based on the starting EPC band or wall type. Under the new wave, the cost cap is set at £7,500 per home for SHDF grant funding.
Additionally, an extra £7,500 is available for low-carbon heating measures in homes not connected to the gas grid, which can be averaged across multiple homes. This means that applicants can receive up to £15,000 in SHDF grant funding per off-gas home, split equally between energy efficiency measures and low-carbon heating.
Gas Grid Incentive
Another innovation in Wave 3 is the introduction of a grant fund of £20,000 per home for up to 10% of homes in an application that are on the gas grid. This funding is intended for the installation of low-carbon heating measures such as heat pumps and heat networks, and it is fully covered by SHDF funding without any co-funding requirement.
Navigating New Procurement Regulations
Wave 3 will also be the first to operate under the new Procurement Regulations, which bring both challenges and opportunities. We are committed to supporting smaller landlords, who may lack extensive in-house procurement teams, by offering tailored guidance and robust frameworks to ensure that all registered providers (RPs), regardless of size, can successfully access and utilize SHDF funding.
Conclusion
The Social Housing Decarbonisation Fund has already transformed thousands of properties, playing a key role in the UK's transition to net zero while ensuring that more people can live in energy-efficient, comfortable, and affordable homes. However, the first two waves encountered challenges that led to missed funding targets.
