This piece from the National Wealth Fund demonstrates how retrofitting social housing to improve energy efficiency will positively impact on health and productivity and boost economic growth in the UK as well as creating savings for public services including the NHS.
Growth begins at home – how retrofitting the UK’s social housing can support economic growth
The National Wealth Fund (NWF) has a central role in delivering the UK Government’s growth and clean energy missions, and they are at the forefront of investing and leveraging public money for the nation’s future. To do this the organisation is investing in projects that are pushing the UK’s economic ambitions forward and are working closely with private financial institutions to resolve some knotty financing problems. One such area, that will have significant ramifications for some of the most vulnerable in society, is in the retrofit market for social housing.
The retrofit (or energy efficiency) market could have significant benefits for individuals, society, economic growth and net zero ambitions but it has seen minimal improvements over the last decade. This has accelerated both income and health inequalities across the UK. At a time of stagnant wage growth and rising energy (and housing) costs, poorly insulated homes (the UK has one of the most inefficient housing stocks in Western Europe) are leading to affordability issues, which in turn lead to cold, damp conditions, as people have to choose between eating and heating. More needs to be done to retrofit homes (above an EPC C) to help reduce income and health inequalities, reducing the cost to the NHS and society and improving the productive potential of current working age population and future generations.
Better insulated homes can lead to more money in people’s pockets. The English Housing survey (2022) suggests that energy efficiency measures could result in energy bill savings of between 10% and 20% for poorly insulated homes (ranging from £180 for a D-rated properties, to almost £800 for E-G rated homes). Savings which would help to reduce the cost of living burden for some and allow greater spending on other parts of the economy.
Better insulated homes reduce the incidence of negative health and productivity impacts for occupants due to cold and damp conditions. Reducing the risks and exposure to such conditions for vulnerable groups, including the elderly, children and the long-term sick, reduces health implications ranging from respiratory, cardiac and mental health issues. Clair and Barker found that between 2019 and 2021 one in five of those who are out of work due to a health condition live in a cold home, whilst for children this leads to more days off school and restricted opportunities.
Better insulated homes could save the NHS and society potentially billions of pounds. The Building Research Establishment Group (BRE) has calculated that excess cold in the very worst housing in England costs the NHS £0.9 billion per year (2018). This includes approximately 720,000 homes with a category one hazard of excess cold (typically insulated to bands F or G). The same study suggested the total societal cost of this group to be £15.26 billion in 2018 prices – and improving the quality of this housing stock would pay back within 7 years – just through NHS savings.
Retrofitting the UK’s housing stock is a huge challenge, which needs clear policy certainty and ambition. One key area which has maintained this ambition is for social housing (SH). Government has set a target for all socially rented homes to be rated at least EPC C by 2030. Around 34% of England’s socially rented homes have an EPC rating below C. It is estimated by the National Housing Federation that it will cost around £36bn to fully decarbonise social housing. This is significantly higher than the available grant support, presenting a huge challenge for the sector. It is crucial to note that occupants of over half of the homes requiring retrofit are living in fuel poverty (the current definition of fuel poverty in England means you can’t be fuel poor if your EPC C or higher) and almost half of all social rented households are in the lowest quintile for weekly income – so retrofitting this housing group will help some of the poorest and most vulnerable in the country.
The SH sector also faces a range of specific barriers to action. Registered providers of social housing face split incentives (incur retrofit costs while their tenants are beneficiaries of any resulting bill savings) and competing priorities, with pressures to invest in new developments. Development activities are more attractive financially, as it is the only way for social housing providers to increase their revenues and thus borrowing capacity. Market feedback also suggests that existing financial products are not suited to retrofit as loan length is too short and requires security, which is limited.
The National Wealth Fund recognised the issue and developed a product to amplify government policy and support further deployment to create warmer, cheaper and lower carbon homes for those that need it most. The NWF has recently launched a number of guarantees against loans, to enable social housing companies to undertake the necessary improvements to properties at very competitive interest rates. NWF’s involvement has helped to bring competitively priced, flexible, long-tenor, unsecured offers into the market, which will accelerate uptake and achieve the government’s ambition.
In total, the NWF will support the deployment of £1.65bn for loans in the sector through the £1.3bn of guarantees. The NWF successfully closed Lloyds and Barclays transactions in October 2024, and similar transactions with The Housing Finance Corporation and NatWest in March 2025. These interventions from the NWF have enabled banks to significantly alter their product offer, providing products that are designed to fund programmes of retrofit works. This will create a step change in the potential ambition for the retrofit market – showing that support can come without large amounts of public money. It is now crowding in similar providers – for example, another key high street bank is looking at providing similar finance opportunities for SH providers but without the need for a NWF guarantee.
Significant economic benefits and carbon savings can be expected from these interventions, in addition to the individual and social benefits. NWF estimates that up to 13,000 jobs could be created and supported, and over 13mtCO2e saved through the retrofitting of an estimated 280,000 homes. It is envisaged that the registered SH providers would support the co-ordination of supply chains to benefit from economies of scale, which will help kickstart UK retrofit supply chains and create jobs.
The SH market is well placed to be an early mover in a difficult sector, demonstrating the short payback period when considering wider social benefits. It can also demonstrate the combination of clear government ambition, (clear EPC targets), with the successful use of institutions like the NWF to leverage in greater private finance to support investments that really can improve lives, opportunities and productivity.
Given the recent Strategic Steer from HM Treasury the NWF now stands ready to broaden its impact across the UK over a wider range of sectors to generate growth, create good jobs, help provide economic security and resilience, and drive the development and deployment of low-carbon technologies. They will continue to deliver investment into key sectors, as a catalyst for private sector investment, and as a source of strategic advice to help shape Government policy in pursuit of its growth and clean energy missions.
About the authors
Bridget Rosewell is Senior Independent Director of the National Wealth Fund. Bridget is an experienced director, policy maker and economist, with a track record in advising public and private sector clients on key strategic issues. In December 2018, Bridget was appointed CBE. She is a Fellow of the Institution of Civil Engineers, the Academy of Social Science, and the Society of Professional Economists. She writes on finance, risk, and uncertainty as well as infrastructure and modelling validation. Bridget has worked extensively on cities, infrastructure, and finance, advising on projects in road and rail and on major property developments and regeneration. She has advised on changes to planning regulation and TfL’s finances and has appeared at planning enquiries.
Sheer Khan is Chief Impact Officer at the National Wealth Fund. He is a senior leader with a career spanning over 20 years in the public sector, tackling some of the most complex social policy issues, including child poverty, pension reform, long term unemployment, manufacturing policy, and energy and climate change. He is an economist by profession, with a track record in applying economic principles and analytical approaches to strategy and policy across the public sector. He has held a number of roles across government departments and was previously the Chief Economist at DWP.
Rob Towers is Deputy Chief Economist and Head of Economics and Evaluation in the Impact team at the National Wealth Fund. Rob’s role involves crafting the impact framework for investments and ensuring NWF initiatives bolster the UK’s net zero and levelling up goals.
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