Social housing net zero standard consultation: interim equality impact assessment

3. Summary of Proposal

3.1.1 The proposal seeks to introduce a new Social Housing Net Zero Standard in Scotland. This will replace the post-2020 Energy Efficiency Standard for Social Housing (EESSH2). Current proposals, that have been co-developed with social housing stakeholders involved in the review of EESSH2, are as follows:

• A fabric efficiency rating (which focuses on the amount of energy for heat consumed by a property) measured in kWh/m²/year.
• A requirement to replace polluting heating systems^[5] with a clean heating system alternative by a backstop date of 2045.
• Ancillary elements of the proposed standard include measures to ensure air quality, variation of the standard in specific cases, and restrictions on re-letting property that cannot be brought up to standard.

3.2 Interaction with Other Policies

3.2.1 The policy interacts with minimum standards for energy efficiency in new build social housing.

3.2.2 The policy interacts with policies for energy efficiency and clean heating in owner occupied and private rented homes.

3.2.3 The policy interacts with policies for ensuring homes meet a minimum standard of habitability.

3.3 Who will it affect?

3.3.1 Everyone benefits if carbon emissions are reduced. However, stakeholders may be concerned if the cost of meeting net zero targets appears to fall disproportionately on any group.

3.3.2 The standard will specifically apply to social rented properties, rented under Scottish secure tenancies by local authorities and registered social landlords. We estimate that this means 590,000 households and 1,170,000 people.^[6]

3.3.3 Some social tenants live in flats. 49% of local authority and 62% of housing association properties were flats in 2019. For the standard to apply effectively to flats it needs to be consistent with standards required for flats in other tenures (owner-occupied and private rented).

3.3.4 The new standard will also extend to Gypsy/Traveller accommodation. This is a change from EESSH2. There are currently 29 public Gypsy/Traveller sites in Scotland provided by 19 local authorities and one Registered Social Landlord (RSL) providing approximately 400 pitches.^[7]

3.4 Socio-economic context

3.4.1 Households in the social housing sector were significantly more likely than households in any other type of tenure to be found in high deprivation areas. Almost half of all households in the social rented sector were in the 20% most deprived areas in Scotland.^[8]

• 42% of local authority properties and 54% of housing association homes were located in the 20% most deprived areas.
• Social rented households are more likely to have an adult looking after the home or family or be unemployed and seeking work.
• Six in 10 adults were not in employment (60% for both local authority and housing association properties). The proportion of adults in social rented properties who were permanently sick or disabled was higher than those in all other tenure types (15% of social rented properties compared to between 1 and 3% in other tenures), and a further 8% were unemployed and seeking work.
• 28% of social rented households stated that they manage well financially, a figure lower than all other tenures.

3.5 Scale of change

3.5.1 A shift to clean heating systems in social housing will require:

• Improvement to the fabric efficiency rating of social houses to ensure as much heat used in the home is retained by the building, reducing the cost of heating and providing an essential foundation for heating systems that do not cause carbon emissions; and
• A shift from forms of heating which use carbon fuels to fuels that do not cause carbon emissions. These are referred to as polluting heating systems throughout the consultation. We can only eliminate all emissions from heat by replacing polluting heating systems, which run on gas, oil (and other fossil fuel heating systems)^[9].

3.5.2 Currently 80% of social housing uses natural gas as is primary heating fuel.^[10]

3.6 Fuel poverty

3.6.1 Heating is a significant cost for fuel poor households and rising costs of fuel particularly impact anyone who has a low income.^[11]

• Fuel poverty has a strong association with income and households in the lower income bands have the highest rates of fuel poverty: 96% for the bottom income band and 60% for the 2nd bottom band. Fuel poverty rates across income bands are similar to 2018 fuel poverty rates.
• There are similar rates of fuel poverty for people living in houses rented from registered social landlords (39%), local authorities (36%) and in private rented homes (36%). In comparison, 12% of those with a mortgage are assessed to be fuel poor.
• Older households (27%) and have a higher fuel poverty rate than families (17%).

3.6.2 Switching from gas to renewable electricity as the primary heating fuel risks increasing fuel poverty, due to the relative costs of fuel, unless supported by measures that reduce the heat use of a building. The new Social Housing Net Zero Standard is designed to encourage measures to reduce heat use, as a first stage towards getting to net zero. We call this a “fabric first” approach.

3.7 What might prevent the desired outcomes being achieved?

3.7.1 The main barrier to improvement of housing is cost. We will encourage landlords to make use of grant funding, where available, from the Scottish Government or elsewhere. However, the main part of the cost of work to improve social homes will rely on the resources of social landlords, including borrowing, which ultimately comes from rental income. Landlords have a responsibility to ensure investment is cost effective and the new target will recognise their discretion in these decisions.

3.7.2 The scale of improvement to social housing is significant and delivering it will require a sufficient supply of clean heating systems, and installers qualified to fit them. Weakness in the supply chain could prevent the outcome from being achieved.

3.7.3 Clean heating technology will require changes in the way people use their homes. This requires ongoing support for tenants who receive new technology in order to ensure that its benefits are realised.

3.7.4 The policy is expected to include an element that allows for variations or exceptions in specified cases, where there are barriers that landlords cannot control or exceptional pressures on housing supply. There is a risk, if these provisions are too broad, that some groups will be left behind.