Scottish Federation of Housing Associations accuses ministers of ‘significantly’ underestimating retrofit costs

Policymakers in Holyrood are significantly underestimating the cost of making homes energy efficient, the Scottish Federation of Housing Associations (SFHA) has warned.

The trade body, in a new report, warns social tenants could face annual rent increases of up to £500 above inflation if the cost of retrofitting social homes is passed on to landlords.

In its consultation paper for the upcoming Social Housing Net Zero Heat Standard, the Scottish government said the cost of converting a home to meet the proposed new requirements would be around £14,000. The standard would require landlords to replace fossil fuel heat systems by 2045 and reach an EPC rating of B or equivalent by 2040.

However SFHA’s report ‘Meeting the challenge of net zero’ cited a fabric first retrofit project in Shetland recently delivered by Hjaltland Housing Association which showed the actual costs to be far higher.

“The capital costs of upgrades are significant –the average installation cost of £33,000-£38,000 for the fabric and ventilation upgrades alone was well above the £14,000 figure for combined fabric and heating upgrades suggested by [the] Scottish government and only feasible with grant support” the report said.

SFHA said there is inadequate funding and finance solutions to support these standards, and suggested government funds are too difficult for providers to access.

It said only £75m has been allocated from the latest £200m allocation for the Social Housing Net Zero Heat Fund, which covers between 50%-60% of the capital costs for energy efficiency and clean heating upgrades.

“Feedback from our members has highlighted the difficulty of aligning this short-term, competitive fund with longer term investment and asset management plans which would offer a more strategic approach”, it said.

The SFHA paper also said progress on energy efficiency is being impeded by uncertainty around proposed standards.

It pointed to the Heat in Buildings Bill, which was delayed until concerns about costs and fuel poverty impacts are resolved. The bill will set a firm 2045 target to decarbonise home and non-residential building heating systems, speed up the rollout of district heat networks, and introduce minimum energy efficiency standards for all buildings.

The Scottish government confirmed last week week that a new version of the bill will be brought forward later this year.

It said: “The proposed Social Housing Net Zero Standard is also still being developed despite previous calls for a revised approach and implementation of a new standard for existing homes to be in place by 2023.” It pointed also to plans to introduce a ‘Passivhaus equivalent’ from 2026 but details of the specific performance requirements have yet to be consulted on.

>>See also: Six key takeaways from Scotland’s Housing Festival 2025

Cassandra Dove , SFHA policy lead for energy and net-zero, who authored the report, said: “Policymakers have significantly underestimated the costs of decarbonising Scotland’s buildings and the current funding settlement from the Scottish Government is completely inadequate to meet the scale of the challenge.

“It’s therefore urgent that in the run-up to the election our political parties commit to long-term funding solutions and clarity of energy standards across all types of housing alongside additional safeguards for those in or at risk of fuel poverty…

“The transition to net-zero represents a huge opportunity for Scotland to play its part in tackling climate change, and provide households with warmer homes, but this must be achieved without burdening social tenants with drastic rent increases or higher energy bills.”