Zero Emission Social Housing Taskforce Financial Roundtable minutes: 2 June 2021

Minutes of the Zero Emission Social Housing Taskforce Financial Roundtable on 2 June 2021.

Attendees and apologies

  • Sally Thomas – CEO, Scottish Federation of Housing Associations (SFHA)
  • Rufus Grantham – Bankers without Boundaries
  • Steven Henderson – Wheatley Group
  • Shona Mitchell - SFHA
  • Henrietta Podd – ALLIA  
  • Mike Gibson –  Viewpoint HA
  • Peter Freer - ALLIA CNC
  • Tony Cain - ALACHO
  • Laura Caven – COSLA
  • Gary Fairley – Midlothian Council
  • Paula Rice – Bield HA
  • Philip Griffith - Bankers without Boundaries
  • Jon Turner – Link HA
  • Paula Oliver – ELHA

SG Officials

  • Carole Stewart – Low Carbon Support Unit
  • Susan Vass – Financial Innovation Unit
  • Lorraine King – Low Carbon Support Unit
  • Linzi Wilding – Financial Innovation Unit

SG Secretariat

  • Catriona MacKean – Scottish Government
  • Naeem Bhatti – Scottish Government
  • Simon Roberts – Scottish Government
  • Tony Cruickshank – Scottish Government


  • Jonathan Sharma– COSLA

Items and actions

Welcome and Introduction

The Chair welcomed everyone to the meeting and asked everyone to introduce themselves and gave an outline of ZEST and what its aims were.

Purpose of Meeting

  • The Chair outlined the purpose of the meeting was to identify potential financial systems and sources to address the challenging Zero Carbon agenda, highlighted that the creation of ZEST as an independent expert group to help achieve this.
  • Highlighting that ZEST is looking at technical, financial, social & economic issues and the creation of 2 sub-groups to address these areas.
  • The financial roundtable has been convened to seek expert input in recognition of the challenges that exist in achieving the ambitious aspirations of decarbonisation and in its financing.


  • Jon Turner’s presentation given from RSL perspective  on the business model (slides attached). The need to have a balance between investment  and protecting tenants’  rental incomes means there is not the flexibility to  cover the investment and all other associated requirements that a landlord will need to achieve on decarb.  Highlighting potential short-term cashflow problems.
  • Gary Fairley gave a presentation from a  local authority point of view and gave an idea of the level of local authorities funding, in 2018/2019 £1.2bn of income stream, of which 50% was spent on management & maintenance. Highlighting the majority of costs are from rental income and that the balance of affordability of rents impacts the ability to invest in new housing stock. Highlighted that tenants are supporting a debt burden of £3.8bn through the rent payments. Highlighting that rents were not elastic enough to cover the costs of decarb and the possibility of increased taxation levels to support changes to address climate change.

General Discussion

  • The chair allowed for an open discussion on relevant topics. The prohibitive cost of new developments was highlighted and if government owned land was given free, this would reduce acquisition cost and grant subsidy. The suggestion of the availability of government land either given or leased was mooted, highlighting the possible creation of a national land agency to address issues like this.
  • It was highlighted that for larger RSLs potential debt capital market options  might be appropriate. Need to understand what RSLs will need to do to weave into their business plans. Need to understand cost implications and therefore finance options. Highlighted potential disparity between large and small RSLs on available options. Some RSLs will be well advanced on stock condition surveys but everyone will probably need to do more once the decarb requirements are more clearly articulated.
  • Agreement for the need on clarity around existing stock. Potential solutions in new build programmes for smaller gap in terms of what needs doing . Discussed existing properties and how to retrofit. Technologies are widely variable and not suitable for all existing properties. Indication that some tenements will struggle to reach EESSH1. Some properties will not be economically viable to make the required change. Potential for stock transfers if looking to pass properties on, but the problem is then passed elsewhere and not addressed. We know there have been some innovative programmes e.g. Edinburgh Uni work looking at district heating schemes that social landlords have the option to opt into. Keen to work with other parties to explore opportunities. Mixed tenure situations needs collaboration and whole-system solutions.
  • Better approach to come up with group solutions rather than progressing individually. Potential for this to cut or share the cost. There is the need for a plan for what to do with assets when retrofit is not economically viable – demolition and regeneration needs to be part of the mix.
  • Highlighted that technology issue is serious concern - opportunities to learn from projects. Highlighted the issue of constant discussions between finance and asset managers about problematic units. The issue can’t be deferred until the technology is proven, while ensuring tenants’ money isn’t wasted.
  • Highlighting the work undertaken by Wheatley  on detailed stock assessments. This highlighted different archetypes which might not be possible with all properties. The need for demolition and regeneration to be part of the conversation. Highlighted that the exact amount of money required is not known. Need to define the parameters in more detail but currently unaffordable based on strength of rental stream and keeping rents affordable. Highlighted that retrofitting doesn't create an income stream. Stated that people don't like the hassle of retrofit; potentially requires significant volumes of grant.
  • Beneficial to establish principles e.g. must not pass on assets as problems – this solves nothing. . Highlighted that it is not appropriate that the social housing sector leads the way. There is the need to acknowledge the factors out with control e.g. huge difference between gas and electricity prices. Suggestion of the need for this to be rebalanced. This is required  or else it will drive fuel poverty.
  • Fundamental requirement to support tenant engagement due to new technologies requiring space for storage heaters for example, highlighted the need for sensitivity in what’s being asked of tenants.
  • ALACHO about to publish work on human rights including affordability and energy efficiency, the need to join up work across all policy agendas. Investment costs have driven up rents to support the supply programme. Rents deemed by some to be too high in social sector and recognise that energy efficiency and affordability are important.
  • Stated that there is no silver bullet to solve the issue and this is a difficult problem. Clearly indicated that you can't load on debt  without breaking the social housing model, requirement for additional revenue to address this. Money could come from Government but there are  other priorities and the potential costs are very  high. Potential for part funding to come from tenants and residents was mooted.
  • Indicated that this is clear challenge looking at one of the hardest issues. Doing this in isolation may not have the answers; there is an assumption that there are estates intermingled with private/commercial units and potentially the most efficient way would be to take the entire neighbourhoods to retrofit in a systematic way. Highlighted that not an easy thing to do but this might be the route to go down. Social tenants may have to contribute but there would need to be balance across different parts of society. Also highlighted that when this work is done on en-masse in entire neighbourhoods greater benefits are realised such as health and wellbeing; economic value; jobs; better air quality. The need to find capital owners willing to invest in those wider benefits e.g. biodiversity; water companies; Government and the need to identify what opportunities are there in this space.
  • Highlighted financial models in the US where a levy is charged for whole areas - within a Scottish context, local authorities could act as the agent. Once the income stream is created capital could be raised against it. Possible further investment could be incentivised by tax breaks for example. Potentially very difficult to understand the size of the problem. If social landlords have capacity, they could be stretched too far and this will impact on credit rating. Indication that some HAs / LAs will have more capacity than others, which risks unfair penalising of organisations which   are more efficient.
  • There is a lot of liquidity and institutional investment and banking  are looking to invest in sustainable projects. There is a need to see that money change attitudes and behaviour and link rates of interest to delivery of kit or outcomes that arise for delivering that investment. The liquidity might be time limited for 3-5 year and the issue of massive pension fund deficits is a risk as they need very long term cash flows. There is potential that this can be more affordable by stretching the payback over very long periods. There are some examples of this type of approach out there and there is a need to bring agencies together to share out risk in a fair way.
  • Highlighted that the issue is not cost of borrowing but the scale of investment, so varying the length of time to pay back could help, there is also a responsibility that social landlords have to make the shift also. Stated that it is not appropriate to drive the sector ahead of other sectors. Highlighted that the level of investment required is potentially somewhere in the region of £5bn. It was highlighted that this capital can certainly be sourced to that level, but who will bear the cost is not yet known.
  • Point raised on the Heat in Buildings programme and highlighted that in the next 5 years, £1.6bn will be invested in the transition. Stated that social housing is a priority for this investment, recognising risk of unintended consequences. There is a need for an estimation on the scale of the challenge and profile of the costs. There is recognition that the SG can't finance transition on its own, but also the need to leverage in private sector investment. Suggestion that social housing could be a leading candidate for investment . One key SNP manifesto is the commitment to set up a national agency for heat and energy efficiency, snd indication that early days of this will be critical.
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