The built environment falls within the scope of ‘physical capital’ under the Levelling Up agenda. In the field of housing, the Levelling Up White Paper signals a commitment to tackle poor energy efficiency “by targeting retrofit funding at the worst-performing homes and those least able to pay”.

Around £2.2bn of finance is available through the Social Housing Decarbonisation Fund, Home Upgrade Grant and Boiler Upgrade Scheme. The government says this will help boost energy efficiency, slash carbon emissions and cut energy bills. In parallel, the Future Homes Standard and Future Buildings Standard will ensure that new homes and other types of build set higher benchmarks for energy efficiency.

Those ambitions have clear resonance with the 11th of the United Nations’ 17 Sustainable Development Goals (SDGs). Covering the built environment, SDG 11 urges political leaders to: “Make cities and human settlements inclusive, safe, resilient and sustainable.” In its notes, the SDG highlights the value and importance of governments promoting:

• sustainable energy in human settlements;

• sustainable construction industry activities; and

• human resource development and capacity building for human settlements development.

We take a look at how successful this might be.

Scale of demand

Thoughts on those hurdles emerged from a 26 April panel talk at the London headquarters of think tank the Institute for Government (IFG). Titled How Should the Government Align Levelling Up and Net Zero?, the IFG event featured insights from industry and the House of Commons, together with speakers from the fields of public policy and green advocacy.

Providing an industry view, Steve Beechey, Group Public Sector Director at construction firm Wates, spoke of his excitement at the “amazing opportunity” his business has secured to deliver net zero-focused projects under the Levelling Up agenda. “Essentially,” he says, “Net zero and Levelling Up are two sides of the same coin.”

Wates is heavily engaged in the retrofitting of homes, having partnered with 19 local authorities (LAs) and housing associations across the UK to make 6,500 properties net zero. But the total scale of demand for retrofitting is far, far greater than that – and it is here that Beechey identifies a potential strain.

In his assessment, it is really important to upskill Levelling Up areas for this task. “There are 29m homes in the UK – and 19m of them need a lot of net zero technology fitted to them. This means that, from now until 2050, three homes must be retrofitted every minute. In addition, there are 24,000 schools, more than 90% of which need retrofitting – plus 2,000 hospitals with similar requirements. It’s an enormous amount of work.”

Creating a pipeline

“As an industry,” Beechey says, “the big issue is that 40,000 young people per annum are coming out of education with construction-related qualifications – but there are only 8,000 jobs for them. So, if we can create a pipeline of net zero projects, we can then provide opportunities to connect more of those young people with work.”

Offering a parliamentary view, the Rt Hon Philip Dunne MP, Chair of the Environmental Audit Committee, notes that the skills challenge is particularly daunting around specific types of net zero technology.

“Heat pumps are a good example,” he says. “There’s a government target to install 600,000 heat pumps by 2030. The latest year I’ve seen figures for was 2020 – a stalled year, for obvious reasons – which stood at 32,000.”

Dunne noted that the government’s ambition is for half its target installations to come from new housing under the Future Homes Standard, which is due to come into effect in 2025. To get from 32,000 to 600,000 would require a huge commitment from householders, developers and LAs, plus a sea change in the skills base of installers.

Anchor investors

“It’s about certainty as much as resources,” says public policy specialist Julia Goldsworthy – former Director of Strategy at the West Midlands Combined Authority. “If I think about some of the conversations that happen locally around education budgets, LAs will train people with the skills required for jobs that exist today, rather than those that might exist further down the line. Who are the institutions and investors that can provide the certainty that those jobs are coming?”

On that point, she notes that interesting conversations are starting to happen in South Yorkshire, where housing associations are exploring how they can become anchor investors that would help to support the skills system, while creating the jobs that will be needed in the future.

Another potential sticking point is finance. As Dunne points out: “Germany and France have some quite imaginative mortgage schemes that provide zero-finance funding to do retrofits at the scale required for individual properties: between €30,000 and €50,000 – which is frankly what it would cost to get many of those 19m UK homes up to scratch.”

The Climate Change Committee, Dunne says, recently issued an average cost estimate for home retrofits of £7,500. However, he added: “At the moment, you can't buy a heat pump in this country for that price.”

Building on Dunne’s points, Roz Bulleid, Deputy Policy Director at think tank Green Alliance, says: “It’s interesting to see the Levelling Up White Paper talk about quality of housing, yet not recognise the huge challenge of making homes comfortable and cheap to run. That feels like a massive disconnect.”

It needs more sophisticated thinking, she says. Finance models such as the energy sprawl model, which takes components that are precision made in factories and then fitted very quickly throughout entire streets, show promise, she says. “There’s also the concept of buying heat as a service. So, I would like to see the whole agenda move up a level. It feels like we need to modernise the retrofit discussion.”

Matching missions

How, then, can stakeholders resolve those skills and finance challenges in a way that will help the Levelling Up agenda honour SDG 11?

ICAEW Technical Manager Dipak Vashi, says: “The premise of each agenda is to reduce inequality and promote fairness across societies. Nowhere better does that task begin than with the fundamental premise of housing.”

Indeed, Vashi points out, two of the core Levelling Up missions state as much – with Mission One aiming for “a globally competitive city in every area of the UK” and Mission Nine attempting to foster “pride in place”.

He adds: “The unique skills of accountants will help to ensure both SDG 11 and the Levelling Up missions can be achieved. As stated above, a large amount of work and finance will need to be put in place to retrofit the UK’s ageing housing stock. Accountants have the tools to assess governance, measurement and accountability of the retrofit programme, to make sure work is kept on track, to budget and to a good standard.”

Accountants are able to act as a conduit between local businesses, who will act as procurement partners, and local authority leadership who will be leading the initiatives, Vashi says. “It is important that the two parties feel confident doing business together, and accountants can ensure this is the case.”