Notice

Clarification questions and responses for SHDF Wave 2.2 (updated 14 February 2024)

Updated 14 February 2024

Applies to England

Update: 14 February 2024

We have clarified our response to the following question: Will it be possible to lodge work under the old PAS standard? - see the Eligible installers section.

Management of the scheme

What is the purpose of the competition guidance document? (added 11 October 2023)

The competition guidance outlines the full policy requirements of the SHDF Wave 2.2 scheme, as well as setting out some of the high-level terms and conditions attached to projects that receive funding. It is not a legal document, nor is it a detailed view of how DESNZ will manage the scheme and the processes projects will need to follow during delivery.

How will DESNZ manage the scheme? (added 11 October 2023)

DESNZ will appoint 3rd party organisations, including a Delivery Agent and a Delivery Partner, to act on its behalf in management of the scheme. Grant Recipients will be required to work collaboratively with all organisations working on DESNZ’ behalf. Within the competition guidance and clarification questions, references to DESNZ stand not just for DESNZ but also any 3rd party organisations that act on DESNZ’ behalf.

Eligible applicants

I am a small landlord with fewer than 100 homes, can I apply? (added 11 October 2023)

All Wave 2.2 proposals should include a minimum of 100 eligible social housing properties at EPC band D-G per bid. Applicants wishing to apply to Wave 2.2 with fewer than 100 eligible social housing properties at EPC band D-G should first look to submit a bid as part of a consortium, with this consortium bid meeting the minimum threshold. Recognising the shorter delivery window on Wave 2.2 than Wave 2.1, if neither of the above are possible despite every effort, then applicants may submit a bid with less than 100 homes with strong justification. It is expected that in such cases bids should be as close to 100 homes as is possible.

Can I bid if I am not a Registered Provider? (added 11 October 2023)

Local Authorities, Combined Authorities, registered providers of social housing (including housing associations and arms-length management organisations (ALMOs) that are registered providers) and registered charities that own social housing will be able to apply to Wave 2.2 of the SHDF, either directly or as part of a consortium led by an organisation that is eligible to lead a bid. ALMOs that are not registered providers can apply as part of a consortium led by an organisation that is eligible to lead a bid.

Registered charities that are non-registered providers will be required to provide evidence that their properties fall under the definition of social housing as defined by the Housing and Regeneration Act 2008 (sections 68-70). This should include evidence of rent rates for the properties being considered for retrofit, with a market rate comparison, and should be included as an annex to the bid application.

We recommend that Registered Charities who wish to apply engage with the Social Housing Retrofit Accelerator as early as possible to access support for their bid.

Landlords who have been successful in receiving funding through Wave 2.1 of the SHDF, and have signed a Grant Funding Agreement with DESNZ, either directly or as part of a consortia, will not be eligible to apply for Wave 2.1 with their stock.

Are combined authorities or other non-stock holding local authorities able to bid on behalf of a consortium? (added 11 October 2023)

Non-stock-holding local authorities and combined authorities may bid as the lead of a consortium on behalf of eligible stock-holding applicants under Wave 2.2 of the SHDF to support the installation of energy performance measures in social homes in England.

You say “Landlords who have been successful in receiving funding through Wave 2.1 of the SHDF, and have signed a Grant Funding Agreement with DESNZ, either directly or as part of a consortium, will not be eligible to apply for Wave 2.2 with their stock”. My organisation received Wave 2.1 funding, but would like to lead a consortium for Wave 2.2 without retrofitting any of our own homes through Wave 2.2 – is this OK? (added 11 October 2023)

Yes, this is acceptable.

UK subsidy control rules

How should subsidy control be managed in consortium bids? (added 11 October 2023)

DESNZ are the public authority responsible for ensuring that subsidies made under the SHDF are compliant with the Subsidy Control Act 2022 (SCA) and will assess the scheme against the SCA’s subsidy control Principles. Each partner in a consortium will be responsible for understanding their own subsidy requirements, as these change dependent on the organisation. We recommend potential applicants engage with their legal and finance teams to understand and review the provisions for grants as laid out in the SCA.

Refer to section 2.3 of the competition guidance for further information on subsidy as it applies to Wave 2.2. See information about complying with the UK’s international obligations on subsidy control.

In terms of subsidy control, is there a ceiling on the amount of grant that can be applied for over a period of time? (added 11 October 2023)

DESNZ are the public authority responsible for ensuring that subsidies made under the SHDF are compliant with the Subsidy Control Act 2022 (SCA) and will assess the scheme against the SCA’s subsidy control Principles. Grant recipients will be responsible for understanding their own subsidy requirements and will be required to provide DESNZ with accurate information to upload to the subsidy control transparency database. We recommend potential applicants engage with their legal and finance teams to understand and review the provisions for grants as laid out in the SCA.

Refer to section 2.3 of the competition guidance for further information on subsidy as it applies to Wave 2.2, including the minimal financial assistance exemption. See the guidance on the subsidy control regime.

How should subsidy control be managed for non-Registered Providers of social housing? (added 11 October 2023)

If your consortium contains a non-registered provider of social housing or a registered charity, your application will be assessed in accordance with the subsidy Principles in the Subsidy Control Act 2022 (SCA). Applicants are again advised to declare the level of state support, if any, supplied to each consortium member on application. The minimal financial assistance exemption can also apply to consortia.

Refer to section 2.3 of the competition guidance for further information on subsidy as it applies to Wave 2.2, including the minimal financial assistance exemption. See the guidance on the subsidy control regime.

Please can you provide specific criteria which housing cooperatives and associations must meet for compliance with subsidy rules? (added 11 October 2023)

Compliance with subsidy rules is based on an assessment made against the Principles in the Subsidy Control Act 2022 (SCA). The Principles are not specific criteria as such. DESNZ are the public authority responsible for ensuring that subsidies made under the SHDF are compliant with the SCA and will assess the scheme against the SCA’s subsidy control Principles. Grant recipients will be responsible for understanding their own subsidy requirements and will be required to provide DESNZ with accurate information to upload to the subsidy control transparency database.

Refer section 2.3 of the competition guidance for further information on subsidy as it applies to Wave 2.2, including the minimal financial assistance exemption. See the guidance on the subsidy control regime.

Eligible properties

Can I retrofit a home in SHDF Wave 2.2 that I retrofitted in a previous wave of the SHDF, even with different measures? (added 11 October 2023)

No.

Will there be a cap on the number of homes that start at EPC D? (added 11 October 2023)

There is no cap on the number or proportion of EPC D homes that can be applied with.

What happens if we have, for example, a small site office (that is a non social home), as part of a block of social housing that, for example, needs external wall insulation - can the EWI be funded on that specific part of the building? (added 11 October 2023)

SHDF Wave 2.2 funding is reserved for social housing stock as defined by the Housing and Regeneration Act 2008 (except in the purposes of infill for non-social homes, as outlined in section 2.5.2 of the competition guidance) and cannot be used for other purposes.

Works to non-domestic buildings or parts of buildings would need to be 100% funded by applicants and cannot be used as part of your co-funding contribution.

Are communal spaces within a social home (such as a social care home) eligible for SHDF funding? (added 11 October 2023)

If a communal space (such as a living room) is within self-contained social housing accommodation, this would be eligible for SHDF funding.

What if I’ve already started a project, but I have homes in the project that work is yet to begin on? Can I apply with these homes? (added 11 October 2023)

SHDF Wave 2.2 funding may only be used for homes where installations of measures have not yet commenced. If preparatory work has already occurred (for instance teams set up, overarching plans in place, tenants engaged, designs developed, remedial/enabling works undertaken, etc), this does not preclude the project from bidding for Wave 2.2 funding.

Are projects based around void properties viable? (added 11 October 2023)

Yes, projects based around void properties are acceptable – although landlords should consider whether prioritising immediate benefits to in-situ tenants is more appropriate when selecting stock to apply with. We recognise that forecasting what properties will be void may be a challenge – therefore, bids submitted on the basis of expected void archetypes will be acceptable, but you will need to demonstrate how you’ve modelled that data in your application. Recognising the challenging nature of developing these bids, we recommend taking a realistic approach to the deliverability, and ensure you plan your projects with contingency. If in reality the number of voids you applied with do not occur, an alternative plan should be in place to fulfil your commitment at bid stage – so for instance, bids still need to include a tenant engagement plan.

Are properties owned by a private individual/organisation but leased to, for example, a registered provider of social housing/registered charity, eligible for SHDF funding? (added 11 October 2023)

No, properties must be owned by an eligible organisation (Local Authority, Combined Authority, Registered Provider of social housing, or Registered Charity who owns social housing) to be eligible for funding, except for non-social housing included for the purposes of infill, as outlined in section 2.5.2 of the competition guidance.

We have a number of properties that are EPC D but already meet the 90kwh/m2/year target. Can these be included in an application? Is there a ratio of this sort of property that would seem reasonable in the bid? (added 11 October 2023)

All social homes below EPC C are eligible to be included in a bid looking to improve them to EPC C, including homes already at 90kwh/m2/year. There is no ‘cap’ on inclusion of such homes in a bid. As with all bids, applicants applying with such homes need to ensure they are delivering good value for money retrofits. In such a case, measures installed through SHDF grant funding should be installed with the primary goal of delivering value for money retrofits towards reaching EPC C rather than of further improving the space heating demand.

Are care homes eligible for SHDF Wave 2.2? (added 20 November 2023)

We don’t believe that care homes would fall under the definition of social housing as defined by the Housing and Regeneration Act 2008 (sections 68-70), which would make them ineligible for SHDF funding.

My organisation owns a detached house, with four rooms. I consider the rooms to be individual ‘units’ of social housing, but there is a domestic EPC at building level (i.e. the domestic EPC is for the house rather than for individual rooms). For the purposes of number of homes/cost caps in an SHDF application, should I count this as one or four homes? (added 20 November 2023)

Properties must fall under the definition of social housing as defined by the Housing and Regeneration Act 2008 (sections 68-70). The cost caps are designed to support delivery of value for money retrofits. In this instance, assuming it met the aforementioned definition of social housing, it would class as one home for the purposes of an SHDF application.

Works to non-social homes and homes at EPC C or above

Is installation of communal heating (such as a shared ground loop) within a mixed tenure block eligible for funding? (added 11 October 2023)

It is anticipated that the only measures covered by the infill policy on non-social homes will be external wall insulation and associated ventilation. Any additional measures, including installation of communal heating systems, would need to be accompanied by a clear argument for why they require a full block application. In the case where non-social homes would still maintain access to their original heating source following the installation of the communal heating system, funding will not be provided and connection costs would need to be provided separately.

Are non-social homes funded under infill policy on non-social homes required to meet the same performance targets as social homes? (added 11 October 2023)

No, non-social homes are not expected to meet the performance targets required of the social homes.

Where there are non-social homes the guidance states ‘Low Income – OO Only (<£31K gross household income) – SHDF will fund 100% of costs of the infill measure.’ Does this mean that there would be £20k available to this property (if it was a solid wall EPC D) or does it mean SHDF will pay all the costs needed to get up to the same standard as neighbouring properties that are being retrofitted (next door could potentially be having more than £20k spent on it split between the social landlord & SHDF)? (added 11 October 2023)

All works on non-social homes funded by SHDF Wave 2.2 will be capped at the value indicated by the ‘total spend if utilising maximum grant funding and associated minimum co-funding’ column in Table 1, based on the starting EPC and wall type. Where a contribution is required as defined by the infill policy on non-social homes (Private Rental Sector or Owner Occupier with a >£31k gross household income homes), the SHDF will fund the value outlined in Table 1 minus the contribution. Any additional spend will need to come from the Applicant.

What is an example of a measure that is not an infill measure? (added 11 October 2023)

An example of a non-infill measure is a Solar PV being installed on each roof of a terrace consisting of both social and non-social homes – the installation of solar PV on the non social homes would not be on an ‘infill’ basis.

The guidance states: “Where a small number of properties in a block or terrace are non-social homes (for instance – a tower block/low rise with a small number of non-social homes, with the vast majority of homes in the block being social homes), they can be included where they enable effective works to social housing.” Does “the vast majority” mean 90% / 70% for homes at EPC C or above and non-social homes respectively? Or is it to be determined on a case-by-case basis? (added 11 October 2023)

The intended purpose of SHDF funding is to improve the energy performance of social homes below EPC C up to that level. Following engagement with the sector, DESNZ recognises that in some cases some homes that do not fit into that category are required to be retrofitted on an infill basis, to allow for effective retrofits of below EPC C social homes. However, to ensure SHDF Wave 2.2 supports retrofit of as many below EPC C social homes as possible, it is a requirement that any such ‘infill’ retrofits are kept to the absolute minimum required - with strong justification for these retrofits required for a bid to be successful. For consortia applications, it is expected that all members will abide by the principle of focusing on the delivery of below EPC C social homes.

For an application to be successful, the 90%/70% requirements do not have to strictly be adhered to in all individual blocks of homes within a wider application so long as the wider application meets the % requirements on below EPC C social homes stipulated in section 2.5 of the guidance - however, the broad principle of focusing on delivering retrofits to below EPC C social homes at scale would still apply on a block basis, so DESNZ would not be expecting applicants to apply with a block of homes that had a proportion of homes that were either EPC C+ or non-social homes that was significantly higher than the levels outlined for the application as a whole in section 2.5 of the guidance. As part of the assessment process, DESNZ will ask for the highest proportion of homes in any single block/terrace in the application that are infill . Landlords wishing to retrofit infill homes may choose to fund them entirely through their own funding, with this funding not being counted towards the co-funding contribution. In this case, they would not have to be included in the number of infill homes outlined in tables 4 and 6 of the application form – supplementary tables (to be published in due course), or in this question about proportion of homes on a block basis. See the response to clarification question 28 for how to fill out the application form in such a case.

Under infill policy for homes at EPC C or above, would semi-detached properties be eligible in small numbers on a street where we were carrying other works to EPC D or lower properties? What about a block where there are 2 poorly performing social rent homes where the other 8 are ineligible? (added 11 October 2023)

The infill principle is designed to facilitate retrofits of below EPC C social homes at scale. Retrofitting semi-detached homes, one of which is not a below EPC C social home or retrofitting a block with a high percentage of homes included on an infill basis as in the example, would not be in alignment with this principle.

As part of the assessment process, DESNZ will ask for the highest proportion of homes in any single block/terrace in the application that are infill. Landlords wishing to retrofit infill homes may choose to fund them entirely through their own funding, with this funding not being counted towards the co-funding contribution. In this case, they would not have to be included in the number of infill homes outlined in tables 4 and 6 of the application form– supplementary tables (to be published in due course), or in this question about proportion of homes on a block basis. See the response to clarification question 26 for how to fill out the application form in such a case.

From my understanding, infill measures are judged at a block level. Where the ‘vast majority’ meet the criteria ineligible properties can be included to allow works to the other eligible properties. My question is at what point does this stop being ‘infill’ and just become an ineligible block? Or is it just bid wide? Can you include a block where there is 1 or 2 poorly performing social rent homes where the other 8 are ineligible? (added 11 October 2023)

The infill principle is designed to facilitate retrofits of below EPC C social homes at scale. Retrofitting a block with a high percentage of homes included on an infill basis as in the example, would not be in alignment with this principle.

As part of the assessment process, DESNZ will ask for the highest proportion of homes in any single block/terrace in the application that are infill . Landlords wishing to retrofit infill homes may choose to fund them entirely through their own funding, with this funding not being counted towards the co-funding contribution. In this case, they would not have to be included in the number of infill homes outlined in tables 4 and 6 of the application form – supplementary tables (to be published in due course), or in this question about proportion of homes on a block basis. See the response to clarification question 26 for how to fill out the application form in such a case.

Does inclusion of infill apply to only properties seeking grant funding? If we include necessary infills of C and fully fund them, do we have to state them in the bid numbers/projects we wish to undertake? (added 11 October 2023)

Applicants wishing to retrofit properties on an infill basis which are funded entirely by the applicant, with this funding not being considered in the SHDF Wave 2.2 co-funding contribution, may do so. If funded entirely by the applicant (meaning no grant funding would be used on these homes, and the applicant funding used not being counted in the SHDF Wave 2.2 co-funding contribution), these homes would not need to be included in an SHDF bid – either the costs involved, or as a contribution to the number of homes retrofitted. Landlords doing so should outline the retrofit of these homes in written response to either question 2.11 or 2.14 (depending on nature of infill) of the Word application form (to be published in due course), without including these entirely self-funded homes in the Excel tables relating to these sections.

Bid size

What if I can’t meet the 100 home level? (added 11 October 2023)

All Wave 2.2 proposals should include a minimum of 100 eligible social housing properties at EPC band D-G per bid. Applicants wishing to apply to Wave 2.2 with fewer than 100 eligible social housing properties at EPC band D-G should first look to submit a bid as part of a consortium, with this consortium bid meeting the minimum threshold. Recognising the shorter delivery window on Wave 2.2 than Wave 2.1, if neither of the above are possible despite every effort, then applicants may submit a bid with fewer than 100 homes with strong justification. It is expected that in such cases bids should be as close to 100 homes as is possible. 

Is there a maximum number of homes per bid? (added 11 October 2023)

There is no maximum number of homes per bid. 

Is there a minimum bid size in terms of bid value? (added 11 October 2023)

There is no minimum bid size in terms of the amount of funding requested. Bids should abide by guidance on minimum number of homes, and costs must fall within the cost parameters set out in the guidance.

Funding will need to be proportionate and limited to what is necessary to achieve the objectives of the scheme. DESNZ reserves the right to review the distribution of funding across England comparative to the number of social homes per region and allocate funding in line with this.

What happens if fewer than 100 homes are delivered due to resident refusals? (added 11 October 2023)

Positive tenant engagement is a critical aspect of successful delivery and we expect to see clear strategies and plans for how this will be achieved. In addition, projects are expected to have contingency plans in place to address tenant refusals. All changes that are submitted beyond your application need to be approved by DESNZ, or third parties acting on DESNZ’ behalf, via the change control process.

Eligible installers

What are the implications of the update to the PAS standard? (added 11 October 2023)

BSI’s revision of the PAS 2035/2030:2019+A1:2022 document was sponsored by the Department of Energy Security and Net Zero (DESNZ) to ensure the PAS 2035/2030 documents would reflect the most current industry best practice while enabling a safe, high-quality approach to domestic retrofit.

The PAS 2035/2030:2023 document incorporates views from a wide range of experts in the industry, as well as comments from BSI’s public consultation which ran from 28 March to 12 May 2023.

PAS 2035/2030:2023 introduces several changes which are summarised start of the document. The document is freely available to download at the British Standards Institute (BSI)’s webstore.

If you have questions about the changes and your role as a PAS 2030 certified installer, we would advise you to view the FAQs available on the BSI webstore, or contact your PAS 2030 certification body.

Will it be possible to lodge work under the old PAS standard? (added 11 October 2023, response clarified 14 February 2024)

Retrofits completed under SHDF Wave 2.2 may be compliant with either PAS 2035/2030:2019+A1:2022 or PAS 2035/2030:2023.

However, projects should be aware of the transitionary arrangements so that they can plan projects accordingly. The transition period to PAS 2035/2030:2023 will end on 30 March 2025, after which BSI will withdraw the PAS 2035/2030:2019+A1:2022. As such, work complying with PAS 2035/2030:2019+A1:2022 projects must be completed by 30 March 2025, and lodged in TrustMark’s data portal before no more than twenty working days thereafter. Where providers anticipate work on a property will continue beyond this we would strongly advise use of PAS 2035/2030:2023 to avoid disruption related to the withdrawal of PAS 2035/2030:2019+A1:2022.

Will options appraisals and medium term plans developed under PAS 2035: 2019+A1:2022 be valid under PAS 2035:2023? (added 29 December 2023)

PAS 2035:2023 requires every dwelling to have a Medium Term Improvement Plan. Under Trustmark guidelines is the responsibility of the retrofit coordinator to ensure that any existing MTIPs, including those done under previous iterations of PAS 2035, are reviewed and updated to ensure they meet the requirements of PAS 2035:2023. The same applies for Improvement Options Evaluations (IOE).

To note, due to similarities between the two standards, we would not expect that MTIPs and IOEs developed under PAS 2035:2019+A1:2022 will need to be completely redone to meet the requirements of PAS 2035:2023. We would advise applicants to consult with their retrofit professionals on what steps are necessary to update these MTIPs and IOEs to the current standard.  

TBA: Improvement options evaluations may change following the introduction of SAP 10 under the 2019 version. This is expected to come into effect from mid 2024.

Related to this, could a retrofit assessment carried out under PAS 2035:2019+A1:2022 be used for retrofit carried out in accordance with PAS 2035:2023? (added 29 December 2023)

Requirements for retrofit assessments differ between PAS 2035:2019+A1:2022and PAS 2035:2023. Therefore, retrofit assessments done to the requirements of PAS 2035:2019+A1:2022 could only be used for PAS 2035:2019+A1:2022 projects.

Is there a time-limit on retrofit assessments? (added 29 December 2023)

There are no time limits on retrofit assessments for SHDF. 6-month time limits were introduced for ECO only due to the specific requirements of the legislation underpinning that scheme, and this does not apply to SHDF projects.

Trustmark lodgement - according to the SHDF guidance all PAS2035 assessments need to be in line with PAS2035:2023, however there are some people that have said Trustmark themselves have said they will not be ready to accept lodgement of PAS2035:2023 until 2025. So how are they expected to lodge this if Trustmark can’t do this? (added 29 December 2023)

Trustmark are preparing functionality changes to the Retrofit Portal to ensure that retrofit projects can be lodged in accordance to PAS 2035:2023. These changes are expected to be completed by March/April 2024, after which retrofit projects can be lodged.

My energy measures contractor uses PAS PAS 2035:2019+A1:2022. Can I still apply to Wave 2.2? (added 29 December 2023)

The PAS 2035/2030:2023 is freely available to download at the British Standards Institute (BSI)’s webstore. The document introduces several changes which are summarised at the start of the document, and any retrofit professional who understands the changes should be able to support a bid in line with the new documents.

United Kingdom Accreditation Service (UKAS) have issued communications to certification bodies which certify installer businesses to the relevant PAS 2030 annexes. Retrofit Installers should contact their certification bodies to understand the steps required to gain PAS 2030:2023 certification.

Wave 2.2 projects are permitted to adhere to either the PAS 2035/2030:2019+A1:2022 or PAS 2035/2030:2023 standards. However, projects should be aware of the transitionary arrangements including the withdrawal of PAS 2035/2030:2019+A1:2022 on 30 March 2025 and plan their projects accordingly.

Performance outcomes

I would like to install a heat pump, but this makes the space heating demand of the home worse due to assumptions in SAP about heat pump running time. Will stopping short of 90kwh/m2/year for this reason adversely affect my application? (added 11 October 2023)

The space heating demand level of 90kwh/m2/year is a consideration ‘where reasonable and cost effective’ – it will not be mandatory for applications to hit 90kwh/m2/year for homes, so long as they appropriately justify the end energy performance the homes will reach bearing in mind consideration of the 90kwh/m2/year, and the ‘reasonable’ and ‘cost effective’ considerations in the application. The justification outlined in this question may be one reason that some applicants give for not hitting the 90kwh/m2/year level in some instances – although the application will also need to appropriately consider the fabric levels of a home as part of the justification of end energy performance of the home.

What is an example of it not being good value for money to reach the 90kwh/m2 space heating demand? (added 11 October 2023)

DESNZ have published some case studies outlining considerations around value for money on the space heating demand level, which should be considered alongside the published guidance and the specific details of the stock applied with.

What justification would be acceptable to demonstrate that fabric is sufficient pre-retrofit so that I can install low carbon heating without fabric? (added 11 October 2023)

A description would be required of why the home is suitable for a heat pump, and why applying with a heat pump alone would be an appropriate value for money solution for the home. As with all applications, landlords should outline how the 90kwh/m2/year has been considered as part of the retrofit design, including on whether reaching this level would be a reasonable and cost-effective approach for the properties in question. Applicants should not try to implement a retrofit that achieves 90kwh/m2/year without considering whether this would be reasonable and cost effective. Applicants applying to SHDF Wave 2.2 with just a heat pump alone as a single measure will still need to reach EPC C (or EPC D for homes starting at EPC F/G that cannot reach EPC C – see guidance section 2.9).

The guidance states that “Low carbon heating in homes on the gas grid may [be installed]…if performance outcomes are reached using less than the maximum grant funding”. Is low carbon heating acceptable if it is needed to meet the performance outcomes (for example, to provide additional SAP points to reach EPC band C)? (added 11 October 2023) 

Yes – low carbon heating can be installed to help reach SHDF performance outcomes on-grid (for example, if replacing an inefficient gas boiler, where the introduction of low carbon heating leads to additional SAP points to reach EPC C). See further published clarifications if considering installing just low carbon heating without additional measures.

If I plan to go beyond the SHDF performance outcomes, should these measures and their impacts be reported in full, or should the application just outline SHDF-funded works? (added 11 October 2023)

It is expected that the grant funding for retrofit works applied for (along with associated co-funding) will be that required to achieve the performance outcomes for SHDF Wave 2.2 (EPC Band C, with appropriate consideration of 90kwh/m2/year, bearing in mind reasonableness and cost effectiveness). For Applicants wishing to go beyond these levels, it is expected that they will only use grant funding to fund a maximum of 50% of the eligible costs to reach EPC Band C, with appropriate consideration of 90kwh/m2/year, bearing in mind reasonableness and cost effectiveness. All eligible costs to install measures to reach a higher performance target will need to come from co-funding. Cost, and justification of costs, will be considered in the Value for Money section of the application form (to be published in due course).

All eligible costs should be included in bids to SHDF Wave 2.2. This includes costs on eligible measures to be installed on below EPC C social homes that landlords are installing through additional co-funding if they wish to go beyond SHDF performance targets. The expected end result of retrofits should be outlined in Table 3 of the application form supplementary tables (to be published in due course) and should be the expected end performance resulting from all eligible costs. For example, if landlords wish to improve homes to EPC C (with appropriate consideration of 90kwh/m2/year) through SHDF grant funding + 50% co-funding, then install additional measures entirely through additional co-funding to reach an end target of EPC B to hit an internal landlord target, then EPC B (along with associated bill savings, energy savings, etc) should be recorded for those homes in table 3.

All costs should also be included in relevant tables of the application form (to be published in due course) - the costs of going beyond the SHDF performance outcomes should not be accounted for in grant funding, and instead should be included exclusively in the cells requiring details of co-funding.

How far does going beyond the SHDF performance outcomes apply? If I install measures to get a property to a low EPC Band C, but could install additional measures to increase it to a higher EPC band C, are these additional measures eligible if they improve the property’s space heating demand? (added 11 October 2023) 

It is expected that the grant funding for retrofit works applied for (along with associated co-funding) will be that required to achieve the performance outcomes for SHDF Wave 2.2 (EPC Band C, with appropriate consideration of 90kwh/m2/year, bearing in mind reasonableness and cost effectiveness). For Applicants wishing to go beyond these levels, it is expected that they will only use grant funding to fund a maximum of 50% of the eligible costs to reach the SHDF Wave 2.2 performance outcomes – with co-funding covering the remaining costs to reach the SHDF performance outcomes, and any funding for going beyond the performance outcomes coming from additional co-funding above the 50% minimum. Cost, and justification of costs, will be considered in the Value for Money section of the application form (to be published in due course). DESNZ considers both grant funding and co-funding when assessing the value for money of retrofits

For clarity, if a home could reach EPC C through a given retrofit approach, but a further appropriate, value for money, eligible measure installation would be needed to reach 90kwh/m2/year, then that could also be partially funded by grant funding. Applicants should not try to implement a retrofit that achieves 90kwh/m2/year without considering whether this would be reasonable and cost effective – see the published case studies for support in thinking on this area.

Will applicants be penalised for going beyond the SHDF performance outcomes? (added 11 October 2023) 

Landlords who wish to do so may improve their properties to a level beyond the performance outcomes of SHDF Wave 2.2, by using additional co-funding (see the guidance section 2.11.2 – ‘going beyond the SHDF performance outcomes’).

Applicants will not be penalised as a result of going beyond the SHDF performance outcomes. Landlords should ensure that all proposals, including those going beyond the performance outcomes of SHDF through the use of additional co-funding, deliver value for money. DESNZ considers both grant funding and co-funding when assessing the value for money of retrofits.

Will bids that aim to address hard to treat properties be penalised? (added 11 October 2023) 

‘Hard to treat’ social homes below EPC C will be eligible for SHDF funding. Applications with such homes will be expected to show that retrofits applied with are appropriate, deliverable and value for money as with all other applications. There will be opportunity to justify the costs applied with in the application form (to be published in due course) in question 4.2. All applications should consider how best to deliver at scale towards the improvement of social homes below EPC C – this may lead applicants to consider whether appropriate to include some homes requiring lighter touch treatment in their application alongside hard to treat homes.

Will my bid score better if I include a high proportion of hard-to-treat homes? (added 11 October 2023) 

No – it is not mandatory for homes to be hard to treat, and DESNZ recognises that many homes will not need a significant number of measures to reach the SHDF performance outcomes. All applications should consider how best to deliver at scale towards the improvement of social homes below EPC C.

When DESNZ asks for ambition from applicants, do you mean ambition in terms of delivering homes to EPC C at scale, or in terms of going beyond EPC C using a deep retrofit approach? (added 11 October 2023) 

Applicants are encouraged to take an ambitious approach to delivering social homes below EPC C to that standard at scale.

DESNZ recognises that some landlords may wish to improve their homes to a level beyond the SHDF Wave 2.2 performance targets – landlords wishing to may apply to do so using additional co-funding (see the guidance section 2.11.2 – ‘going beyond the SHDF performance outcomes’). However, going beyond performance outcomes is not a requirement from DESNZ, and many landlords will not wish to go beyond these performance outcomes.

Eligible measures

Will DESNZ prioritise projects proposing fabric over those with low carbon heating, even if the justification for only doing low carbon heating fitted their definition of reasonable? (added 11 October 2023)

Evaluation criteria are designed in alignment with the guidance provided to landlords – a landlord that applied with just an appropriate low carbon heating measure (see section 2.10.1 of the competition guidance) would not be disadvantaged compared with one that also/instead included fabric in their application, unless the retrofit approach was not sufficiently justified.

Do I have to apply with fabric measures, or can I apply with just non-fabric measures (such as low carbon heating or solar PV) on some or all homes? (added 11 October 2023)

A fabric first approach to works is required. However, if the level of fabric is sufficient pre-retrofit, and further fabric improvements would not represent value for money, then an application with only non-fabric measures (such as low carbon heating or solar PV alone) on some/all homes can be considered, with justification required.

This could include the case where the fabric of the home is already sufficient and, because of the inefficiency/cost of the existing heating system, the appropriate next step on a value for money journey to Net Zero is to replace the existing heating system with a much more efficient electric heating system (for example, replacing inefficient direct electric heating in a tower block with a Shared Ground Loop).

Would failed CWI/loft insulation extraction and refill on a home starting below EPC C be eligible for funding if other measures are installed to make it an EPC C, given it would increase resident experience? And what evidence is required to support this? (added 11 October 2023)

If this is necessary for effective retrofit of the home then this would be eligible for funding, as outlined in the guidance section 2.11.3. However, costs for this purpose should be kept to a minimum - any inclusion of spend on this would need to be proportionate, with value for money on retrofits delivered being a key driver of SHDF funding award. Consequently, bids with these costs as a high proportion of overall costs may score less well on value for money. Written justification of the reason for extraction of CWI being included in costs for an SHDF bid would suffice as evidence – applicants should briefly outline why this approach has been undertaken for the stock applied with in response to question 2.6, and justify why it is a value for money approach, including the cost levels incurred for this purpose, in response to question 4.2.

Homes where this approach is taken would still need to reach the SHDF performance outcomes (see guidance section 2.9).

Funding and eligible costs

If measure costs inflate, will grant cost caps inflate along with them/does DESNZ hold the right to raise cost caps post award? (added 11 October 2023)

For Wave 2.2, the cost cap levels are those outlined in section 2.11.2 of the competition guidance and it is expected that these will not be adjusted for any inflation. There will be a change control process to consider any changes that arise during delivery, but this is not expected to result in an increase to the cost caps. The expectation is that bidders use the certainty provided by the longer delivery windows for Wave 2.2 to secure a contract within the stipulated grant funding levels (plus co-funding) over the delivery period. Bidders are expected to provide as accurate costs as possible at bid stage – including through engaging with the supply chain, but also factoring in any estimates of inflation. If costs do increase during delivery, then landlords may input more co-funding to cover these.

What will be the process if my costs go up due to inflation, particularly where I could not anticipate this at application stage? (added 11 October 2023)

DESNZ will not increase the grant funding allocated to a project. Projects will be held to account for the contents of their application.

Applicants are expected to provide as accurate costs as possible at bid stage – including through engaging with the supply chain, but also factoring in any estimates of inflation. Projects should control their costs as much as possible by maintaining accurate estimates and implementing financial controls and good procurement practices.

Any changes to the agreed project scope will be subject to the change control process.

Do the cost caps include VAT and if so, what do we assume VAT to be? 10% 5% or 0%? (added 11 October 2023)

The cost caps include non-recoverable VAT. Grant applicants are expected to seek their own advice on VAT (for example, internal finance team/HMRC) before application. Inaccurate submission of VAT is a potential blocker to effective delivery.

Should costs for non-SHDF eligible measures be included as co funding? (added 11 October 2023)

No – only SHDF eligible measures should be included as co funding. Any non-eligible measures must be funded by the applicant in addition to the 50% co funding requirement for eligible measures, and should not be included in the application.

Can I carry out modelling or start works before I receive grant funding? If so, what can I spend funding on? (added 11 October 2023)

All eligible costs that are incurred by a project between competition launch and signing of the GFA can be claimed against the overall co-funding requirement should the project be successful in grant award. DESNZ does not take on any risk or liability for funds spent in this period, including if a project is not successful in competition.

Activities that are necessary pre-requisites for writing a high quality bid cannot be claimed, including work to understand the eligibility of stock such as EPC assessments or modelling. This principle is designed to incentivise early project kick off and utilisation of the time between competition launch and GFA signature.

Question 2.1b provides applicants with guidance on stock identification for an SHDF bid. There will be a change control process to consider any changes that arise during delivery, through which all changes that are submitted beyond your application need to be approved by DESNZ, or third parties acting on DESNZ’ behalf.

How will the process for counting pre-GFA activity towards co-funding work? (added 11 October 2023)

Eligible costs incurred between the launch of the Wave 2.2 competition and the signing of the Grant Funding Agreement (GFA) may be counted towards a project’s co-funding requirement. Eligible costs are described in section 2.11 of the competition guidance and defined in the GFA. Projects should keep a record and evidence of any spend incurred. Once the GFA has been signed, projects will be required to set out their co-funding spend in the first monthly reporting cycle and evidence this as part of the reconciliation process. This spend will be at the project’s risk pending successful award and projects carry the risk for any contractual arrangements that they would not be able to uphold if they are unsuccessful in the SHDF competition.

We are hoping to receive funding from Homes England’s Building Safety Fund to upgrade existing cladding and external wall insulation on Council owned tower blocks. These tower blocks are also being considered for a SHDF Wave 2.2 bid. Would these properties still be eligible for SHDF Wave 2.2 funding if HE funding was awarded? If these funding streams could work in tandem, would these properties be looked upon favourably in a SHDF bid, as evidence of greater value for money for DESNZ? (added 11 October 2023)

SHDF funding may be used alongside funding from other schemes, as long as the same measure is not funded twice. We recognise that in exceptional circumstances value for money investments may be made where other Government funding is used as an appropriate part of co-funding for SHDF Wave 2.2 works, for example to support building safety work. However, we would not anticipate that the majority of the co-funding for a project would come from these sources – and any ‘blended funding’ that were to be considered for co-funding would need to be spent on an eligible cost of SHDF Wave 2.2, as outlined in the guidance document.

Whilst the SHDF is open to blending funding across schemes, the applicant must ensure that any funding awarded through the SHDF Wave 2.2 meets SHDF Wave 2.2 objectives. Funding from other schemes must be used correctly and in line with the eligibility criteria of that scheme. SHDF is not responsible for ensuring the correct use of funding from other Government schemes. Any blended funding from another scheme has to be secured by the point of application to SHDF, and evidenced in the SHDF application, rather than being assumed that it will be secured at a later date at the point of application to SHDF.

The Grant Funding Agreement will require grant recipients to declare that acceptance of the grant offered will not result in double funding of a single measure, for example, they are receiving funding from another source for the same or similar activity.

Would SHDF fund any decoration costs (to make good after works have caused mess or disruption)? (added 11 October 2023)

It is not expected that decoration costs would be funded through SHDF funding – these would have to be provided by landlords, and should not be included in the co-funding amount provided in the application form (to be published in due course) due to not being an eligible cost.

Is there to be a standardised approach for applications to inflation, or should landlords use their own expertise? (added 11 October 2023)

The cost breakdown provided in the application form (to be published in due course) should be an accurate reflection of actual costs that will be seen in delivery. If not possible to secure a fixed price for works at bid stage that will still be valid at award stage, applicants are expected to use their knowledge of the market to ensure cost variances are factored into the bid. These considerations are anticipated to include inflation. The rate at which inflation is factored in will be left at the discretion of the bidder but must be supported by evidence which may include, but is not limited to, recent experience on construction projects, or recent price changes seen in the market.

Is value for money to be based entirely on the lowest cost options available? (added 11 October 2023)

The value for money section of the application form (to be published in due course) provides opportunity for applicants to provide cost levels, as well as a justification of those cost levels. The cost breakdown provided is expected to be an accurate reflection of actual costs that will be seen in delivery. No decision on funding award will be made on cost levels alone.

DESNZ will carry out a value for money assessment of bids, including a cost benchmarking exercise (that is, comparing equivalent costs against costs seen in other bids) – with the aim of ensuring that bids represent good value for money but also are evidence based. Bids with poor cost justification will receive a low value for money score. The value for money assessment, including cost benchmarking, will be considered at portfolio review stage, to supplement the written response to this question – with the suitability of bids exhibiting relatively very high costs (that is potentially not exhibiting value for money) or very low costs (that is potentially not exhibiting evidence based/realistic costs) in particular likely to be considered.

If you are part of a consortium, are cost caps averaged for the consortium or individual partners homes? (added 11 October 2023)

Spend levels are to be averaged across consortia when determining whether the cost caps have been complied with, rather than individual partners. For all consortia members, it is expected that the grant funding for retrofit works applied for (along with associated co-funding) will be that required to achieve the performance outcomes for SHDF Wave 2.2 (EPC Band C, with appropriate consideration of 90kwh/m2/year, bearing in mind reasonableness and cost effectiveness). All individual consortia members should abide by the principles of the SHDF guidance, including that of delivering value for money retrofits.

For clarity, it is not expected that this ability to average across the consortia would be exploited by one member to use a far greater level of grant funding than the cost cap to reach a more ambitious performance target (such as EPC A), as long as the consortia as a whole was within the cost cap levels due to lower spend from other members.

Can building works to prepare for installation – for example removal of failed cavity wall insulation – also be classified as a capital cost, rather than the administration and ancillary (A&A) cost suggested in the guidance? (added 11 October 2023)

DESNZ would expect this to be treated as an A&A cost if using SHDF grant funding towards it. If an applicant needed to treat this as a capital cost for internal accounting purposes, then they would need to use only their own funding to do so (meaning no SHDF grant funding for this purpose), and this funding should not be included as part of the co-funding contribution in the SHDF Wave 2.2 application. Consequently, this means that if treating removal of failed cavity wall/loft insulation as a capital cost (rather than A&A), the costs for this purpose should not be included anywhere in the costs outlined in the application form supplementary tables or in the value for money section of the application form (to be published in due course). In this case, the fact that the retrofit approach includes removal of failed cavity wall/loft insulation should still be referenced as appropriate elsewhere in the application form - for instance, when outlining and justifying the retrofit approach, factoring time taken to remove failed cavity wall/loft insulation in to the project plan, etc.

Scaled cost caps by wall type

What properties can utilise the solid wall cost cap? (added 11 October 2023)

Any home that is not classed as ‘cavity’ in the SAP wall type categorisation may use the solid wall cost cap if appropriate to do so. This includes brick, stone (granite, sandstone or whinstone), timber, system build, or curtain walls. Applications wishing to utilise the solid wall cap will be required to justify why they are doing so. As with any application, value for money proposals will be required. The level of funding applied for should be dependent on the cost of improving the stock to the SHDF performance outcomes and should not be dependent on the maximum level of grant funding for retrofit works available. On a by exception basis, some homes that are not ‘solid walled’ may be eligible for the higher cost caps, where the specifics of the archetype requires a treatment more aligned with the solid wall cost cap (for example, cavity wall homes with cavities so thin that they cannot be filled, and thus requiring solid wall insulation). DESNZ anticipates a very small number of homes will fall into this category, and strong justification is required in such cases.

What about properties that have a mix of cavity and solid walls? (added 11 October 2023)

We would anticipate that these homes would be eligible for the solid wall cap. Applications should justify this use of the cap.

We have some properties in our stock that have been recommended partial external wall insulation by our retrofit team and I wanted to ask if a partial insulation measure would be fully funded if it were to improve the SAP and energy efficiency of a property? (added 11 October 2023)

Yes – partial insulation would be eligible for SHDF Wave 2.2 funding as long as works meet the performance requirements, and are in alignment with other areas of the SHDF guidance, for example PAS 2035.

What level of evidence is required to justify the use of the solid walled cost cap? (added 11 October 2023)

For homes that fall within the definitions of brick, stone (granite, sandstone or whinstone), timber, system build, or curtain walled homes, statement of these wall types along with why the cavity cap is not appropriate for the specific homes will be sufficient justification. For other homes wishing to utilise the solid wall cost cap (for example, homes with cavities that are too thin to fill), a clear statement of why they cannot be appropriately treated with cavity wall insulation will be required.

What evidence is required for properties that are not solid walled but for which the higher solid wall cost cap is being claimed? Are DESNZ able to offer guidance on what is deemed to be acceptable? (added 11 October 2023)

On a by exception basis, some homes that are not ‘solid walled’ may be eligible for the higher solid wall cost cap, where the specifics of the archetype requires a treatment more aligned with the solid wall cost cap (for example, cavity wall homes with cavities so thin that they cannot be filled, and thus requiring solid wall insulation). DESNZ anticipates a very small number of homes will fall into this category, and strong justification is required in such cases. The cost of measures exceeding the cavity wall cost cap outlined above (for example, spending £12k to retrofit a cavity wall EPC D home) is not a sufficient justification for utilising the higher solid wall cap.

Landlords who believe the specifics of the archetype they will be applying with justify use of the higher cap should provide written justification in response to question 2.5 of the application form (to be published in due course).

The guidance states that “walls are classified as cavity, brick, stone (granite, sandstone, or whinstone), timber, system build or curtain wall, in alignment with the SAP categorisations. Brick, stone (granite, sandstone or whinstone), timber, system build, or curtain can be considered as solid walled for the purposes of the cost caps if appropriate to do so.” In terms of the guidance is there any more detail on ‘if appropriate to do so’ for classing timber frame homes as a ‘solid wall’? (added 11 October 2023)

DESNZ expects applicants to put forward value for money applications, without unnecessarily maximising cost caps, and without unnecessarily utilising higher caps/spend levels than appropriate.

Brick, stone (granite, sandstone or whinstone), timber, system build, or curtain can be considered as solid walled for the purposes of the cost caps if appropriate to do so. Whether appropriate to do so will be dependent upon the retrofit required to be carried out – if a home within one of these wall types has cavity walls and it is technically possible to fill the cavities, the cavity wall cap will likely be more appropriate. For social homes that fall within the definitions of brick, stone (granite, sandstone or whinstone), timber, system build, or curtain walled homes, DESNZ recognises that it is unlikely to be the case in many cases that it is technically possible to fill cavity walls (if indeed the properties do have cavity walls) – so statement of these wall types along with written justification in response to question 2.5 on the application form (to be published in due course) of why the cavity cap is not appropriate for the specific homes will be sufficient justification.

Additional low carbon heating cost cap off gas grid

How do cost caps work for homes on the gas grid that wish to install low carbon heating? (added 11 October 2023)

If retrofitting a cavity wall EPC D home that costs £6k (£3k grant funding+£3k co-funding) to reach EPC C with appropriate 90kwh/m2/year consideration, a landlord can use the additional £2k grant funding within the £5k cost cap towards cost of LCH. This would need to be matched by an additional £2k co-funding. Any extra spend to complete the retrofit would be required to come from additional co-funding. The retrofit must comply with the key principles outlined in section 2.10.1 of the competition guidance document.

If a home is connected to the gas grid but is electrically heated, is it eligible for additional low carbon heat cost caps (meaning is it treated as an ‘off grid’ home)? (added 11 October 2023)

For the purposes of SHDF Wave 2.2, an off gas grid home is defined as one that does not use mains gas for heating purposes.

I have a small block of flats where 1 is on gas and the others have storage heaters. I would like to install heat pumps to the whole block. Would SHDF consider this as an infill measure to include the flat on gas with the heating? (added 11 October 2023)

The homes using electric storage heaters classify as off gas grid homes – and are therefore able to utilise the cost cap structure for off gas grid homes in Table 1, section 2.11.2 of the competition guidance. The one home that uses mains gas for heating would fall under the on gas grid cost cap structure – see table 2 in guidance.

Can I use the energy efficiency cost cap as well as the low carbon heating cost cap for a low carbon heating solution off gas grid? (added 11 October 2023)

The primary source of funding for low carbon heating off grid will be through the low carbon heating grant funding, and it is expected that in most cases this will be sufficient to fund installation of low carbon heating alongside associated co-funding. However, if necessary, bids will also be able to use some of the energy efficiency grant funding for installation. This must not compromise the delivery of appropriate energy efficiency measures, and should represent value for money.

If looking to install solar PV in an off grid home, would it class as an energy efficiency measure or a low carbon heating measure? (added 11 October 2023)

Solar PV would class as an energy efficiency measure.

Administration & Ancillary costs

Can I spend more than 15% of total project costs on Administration & Ancillary costs (A&A)? (added 11 October 2023)

Grant funding on A&A must be less than 15% of total grant funding - the expectation is that A&A spend should make up less than 15% of total costs. There is not scope to increase this proportion of grant funding used on A&A; however, in exceptional circumstances there may be scope for landlords to use slightly more than 15% of overall project costs for A&A purposes through spending slightly greater than 15% of the co-funding contribution on A&A. Note that this approach is not encouraged in general. Administration and ancillary costs are expected to be as low as possible, and DESNZ will be assessing applications on value for money grounds, including requiring justification of costs.

Would SHDF Wave 2.2 funding cover cost of the removal of gas supply from properties if the move to a heat pump takes place? (added 11 October 2023)

Yes, the remedial aspect of administration and ancillary costs covers those elements vital to the retrofit of social homes that arise through reasons other than landlord neglect. This would encompass the removal of gas supply from properties, but this would need to comply with the expectations and requirements on A&A spend (see section 2.11.3 of the competition guidance). Any inclusion of spend on remedial works would need to be proportionate – with value for money on measures delivered being a key driver of SHDF funding award.

We have some blocks that have benefited from previous cavity wall insulation and the majority of the properties are at EPC C. However, we know that the building insulation and fabric is failing. Will SHDF Wave 2.2 allow the insulation to be removed and a new EPC to be completed at that stage (we expect them to be EPC E) and then to develop the retrofit plan? (added 11 October 2023)

The remedial aspect of A&A costs covers those elements vital to the retrofit of social homes that arise through reasons other than landlord neglect. This would encompass the removal of failed cavity wall insulation, but this would need to comply with the expectations and requirements on A&A spend (see section 2.11.3 of the competition guidance). Any inclusion of spend on remedial works would need to be proportionate – with value for money on measures delivered being a key driver of SHDF funding award.

Unless being included on an infill basis (see section 2.5.1 of the competition guidance on ‘Homes at EPC C or above’), if a home is EPC C or above according to a valid EPC, then it cannot be included in an application unless either an EPC assessment is carried out showing that it is below EPC C, or a retrofit assessment is carried out and as part of the retrofit assessment process the property is evidenced to be below EPC C. Acceptable evidence as part of the retrofit assessment process must be based on government approved SAP 2012 or SAP 10.2 software. This would have to be evidenced at the point of application.

DESNZ would not expect that the default replacement for the removed cavity wall insulation would be external wall insulation – unless cavity wall insulation is not technically possible for the archetype.

All installs need to be in alignment with PAS 2035/2030:2023.

Can administration and ancillary costs be used to train both in house and contractor retrofit coordinators to deliver the project? (added 11 October 2023)

In house training of Retrofit Co-ordinators could be included as an administration and ancillary cost. We would not expect SHDF funding to be used to train external retrofit co-ordinators.

A&A costs account for removal of failed cavity wall insulation - what about failed External Wall Insulation (EWI) (meaning peeling off and buckling), on a home starting below EPC C? (added 11 October 2023)

This is a clearly visible issue, and DESNZ would therefore expect that landlords would have addressed this as part of their stock maintenance. It is therefore not eligible for SHDF funding, or to be included as part of the co-funding contribution. Landlords may address this through their own money outside of the co-funding contribution.

If EWI needs to be removed for safety reasons as supported by the Building Safety Fund, then landlords may wish to consider blending SHDF Wave 2.2 funding with Building Safety Fund funding.

From the guidance: “Due to the scale and size of the projects, Applicants are expected to have administration and ancillary (A&A) costs associated with the delivery of the project. A&A costs are expected to be as low as possible, with a requirement that grant funding for A&A comprises less than 15% of total grant funding (with total grant funding including both grant funding for capital costs for retrofit works and grant funding for A&A). We expect that total costs for A&A (grant funding for A&A + co-funding for A&A) will comprise less than 15% of the total project costs (total grant funding + total co-funding, including both capital costs for retrofit works and A&A costs).”

Could you please provide a worked example on A&A costs in relation to grant and total costs? (added 11 October 2023)

Suppose that the total eligible cost (total grant funding + total co-funding, including both capital costs for retrofit works and A&A costs) of a project is £10 million, and this is made up of £9 million of capital costs for retrofit works and £1 million of A&A costs.

A&A costs (£1 million) make up 10% of total project costs (£10 million) – this would be within the 15% expectation on A&A as a proportion of total project costs outlined by the guidance.

Suppose also that the £10 million total project costs were to be made up of £5 million grant funding and £5 million co-funding (that is 50% co-funding).

Suppose that £4.5 million of the grant funding was for capital costs for retrofit works, and £0.5 million for A&A costs – with the remainder of the project costs (£4.5 million capital costs for retrofit works, £0.5 million A&A costs) to be covered by co-funding. In this example, A&A grant funding (£0.5 million) would make up 10% of the total grant funding (£5 million) – and this would be within the 15% requirement on A&A grant funding as a proportion of total grant funding outlined by the guidance.

However, were the same project to have its £5 million grant funding made up of £4 million for capital costs for retrofit works and £1 million for A&A costs, with the remainder of the project costs (£5 million capital costs for retrofit works, £0 A&A costs) to be covered by co-funding, then A&A grant funding (£1 million) would make up 20% of the total grant funding (£5 million). This would not be permissible, as 20% is greater than the 15% requirement on A&A grant funding as a proportion of total grant funding outlined by the guidance.

Please note - any grant funding for capital costs for retrofit works will be required to comply with the cost caps outlined in the guidance. Cost caps are exclusive of administration and ancillary costs. All projects will be expected to exhibit value for money, as outlined in the guidance. Clarification questions and application form (to be published in due course).

The guidance text for Table 15 of the supplementary tables to the application form (to be published in due course) outlines what costs are included in both the A&A and co-funding % calculations – the above example assumes that no costs for this project fall outside the scope of these calculations.

Why was the digitalisation funding in Wave 2.1 removed for Wave 2.2? (added 11 October 2023)

Due to the reduced delivery time and funding amount available for Wave 2.2, there will not be a dedicated digitalisation funding offer. Lessons learned from Wave 2.1 digitalisation will be fed back to the sector at an appropriate point.

Delivery and grant funding spend

Delivery up to 31 March 2026 may not be long enough for the project I am planning, and there is no room for contingency. How can I ensure that the project can carry on despite potential delays? Will projects be able to go past 31 March 2026, and what will be the process? (added 11 October 2023)

The delivery window for SHDF Wave 2.2 will go up to 31 March 2026. Projects must spend all their grant funding by 31 March 2025. Projects are expected to deliver within this timeframe, and all applications should be based on these timelines.

Projects can utilise the offer to use co-funding upfront to kick off their projects at SHDF Wave 2.2 competition launch. ‘Competition launch’ means the date on which the final set of competition and grant documents will be published.

Any changes to the agreed project scope will be subject to the change control process. These principles will be reflected in the Grant Funding Agreement.

If I get Wave 2.2 funding, can I delay start on any Wave 3 delivery to allow Wave 2.2 to complete? (added 11 October 2023)

Timescales and policy design for any potential Wave 3 are currently being developed. However, we would expect bidders for both waves to come forward with appropriate and deliverable plans that take into account their existing commitments.

What is the required split between grant funding and co-funding throughout the project? (added 11 October 2023)

DESNZ generally expects projects to fund activities by equal parts grant funding and co-funding throughout delivery. Projects must plan for this outcome.

Projects running to 31 March 2026 will be utilising only co-funding in the last 12 months of delivery, and so deviations from the equal parts principle are likely to occur, however a minimum of 25% of co-funding must be utilised by 31 March 2025.

Projects must uphold their co-funding commitment. Evidence that the required level of co-funding has been secured within the Lead Applicant’s organisation will be collected at application stage. Projects will need to evidence their continued commitment to the agreed co-funding throughout delivery. Failure of projects to contribute the overall agreed level of co-funding will result in a reduction in grant funding and clawback where necessary, or potential termination of the agreement.

What will be the process in managing my project if I am not able to spend grant funding allocated in the financial year? What are the flexibilities around this? (added 11 October 2023)

DESNZ expects projects to spend their baselined, agreed grant funding amount in each financial year. Projects must spend all their grant funding by 31 March 2025.

Where there is expected or actual underspend against this baseline, projects should make DESNZ aware of this eventuality as early as possible and submit a change request which will go through the change control process.

The guidance specifies that projects can receive a one-off upfront payment at the start of the project where there is ‘explicit need’. How do you define this and who is eligible? (added 11 October 2023)

Projects that can provide a clear reason as to why an upfront payment will materially improve the delivery of their project in time, cost and/or quality will be eligible for this payment. DESNZ takes on risk by giving upfront payments and therefore there needs to be a corresponding identifiable benefit to justify the provision of funding. DESNZ will assess the need for this on a case-by-case basis.

DESNZ views the lack of early cash flow in an organisation as an example of explicit need, however DESNZ is open to any case for upfront funding and will look at each request on a case-by-case basis to determine whether the upfront payment can be provided. DESNZ will follow the ‘Managing Public Money’ guidelines in all instances when making these decisions.

Which documents need to be signed by successful Lead Applicants before grant funding payments will be made? Can I start work on my project ahead of all documents being signed? (added 11 October 2023)

Lead Applicants will need to sign their Grant Offer Letter and Grant Funding Agreement (with all associated documents including the Data Sharing Agreement) before grant funding payments can be made. This is to ensure that all projects are operating on a level playing field and have formally signed up to the scheme terms and conditions before receiving funding.

Projects may start work ahead of these documents being signed using co-funding and at their own risk.

DESNZ is making every effort to give Lead Applicants early sight of the Grant Funding Agreement and Data Sharing Agreement, so they can review the generic documents and ask for any clarifications well in advance of execution. The GFA, GOL and DSA draft templates will be uploaded on the SHDF Wave 2.2 webpage before the competition window opens and signature of these documents is expected in March 2024 (subject to changing timelines).

What are the differences between the Wave 2 and Wave 1 Data Sharing Agreement, and are there any elements I should be particularly aware of? (added 11 October 2023)

DESNZ has adjusted the DSA to reflect changes in the Wave 2 scheme rules/guidance. The most significant change since Wave 1 is that DESNZ will no longer seek consent for data collection in relation to wider DESNZ evaluation activities. DESNZ will contact installers and tenants to take part in a scheme evaluation for Wave 2 in reliance on public task instead of consent. This will reduce the need for DESNZ to possess identifiable data and reduce a significant burden on SHDF grant recipients.

SHDF Wave 2 will collect Smeters data. DESNZ’ smart meter contractor will send an invitation letter and recruitment materials via post or online to relevant households in SHDF Wave 2.2 to collect delivery data.

DESNZ has also reduced the retention period for data on the scheme, aligning to business needs.

The guidance says projects should spend 100% of grant funding and at least 25% of co-funding in financial year 2024 to 2025, then 75% co-funding in financial year 2025 to 2026. What are the flexibilities and process? (added 11 October 2023)

100% of the project grant funding should be spent over financial year 2024 to 2025, as well as a minimum of 25% of the total co-funding spend. Any additional co-funding remaining after 31 March 2025 should be spent by 31 March 2026.

These principles will be reflected in the Grant Funding Agreement.

If my project is delayed, will I be able to just use grant funding in financial year 2024 to 2025? (added 11 October 2023)

Projects are expected to uphold their co-funding commitment, and DESNZ will need to have confidence throughout delivery that this will be the case. This is expected to be demonstrated through funding activities in broadly equal parts grant funding and co-funding throughout delivery, and a minimum of 25% co-funding must be spent by 31 March 2025.

Where projects anticipate they will utilise the longer delivery window out to March 2026, only co-funding can be used after March 2025.

Project performance will be assessed on a case-by-case basis and where changes are required, projects will be required to go through the Change Control process. Where there is significant underspend, including in co-funding, DESNZ may require projects to reduce their scope (and thereby reduce grant funding in line with cost caps) or terminate.

Could you please clarify the timeline for being able to claim our upfront spending costs as co-funding? If I have an invoice for this cost dated after competition opens would this be sufficient for it to be included towards the co-funding contribution? (added 11 October 2023)

Eligible costs that are incurred from the date of competition launch can be counted towards the co-funding requirement of the project should the project be successful in grant award. The invoice on such eligible costs would need to be dated after the competition launches to count towards the co-funding contribution.

These eligible costs would include necessary costs for delivery relating to PAS that were incurred over this time period (for example, any retrofit assessments, airtightness tests and ventilation checks carried out at this stage) on homes that end up being retrofitted through SHDF.

DESNZ does not take on any risk or liability for funds spent in this period, including if a project is not successful in competition.

Activities that are necessary pre-requisites for writing a high quality bid cannot be claimed, including work to understand the eligibility of stock such as EPC assessments or modelling. This principle is designed to incentivise early project kick off and utilisation of the time between competition launch and GFA signature.

Section 2.11.3 of the guidance lists a number of eligible costs (both capital and administration and ancillary) for SHDF. Applicants with questions about eligible costs should review this section of the guidance in particular.

Where there is an explicit need for upfront funding (that is funding ahead of works being completed) projects may request to receive this up to 10% of the grant or £1m (whichever is lower). If DESNZ approve this request, the agreed funding will be released upon signature of the GFA.

Where does the timeline allow for a formal procurement to take place so cost certainty can be gained? The timeline to conduct a FaT tender for works is not practical in the timeframe given. Under Public Contracts Regulations we will be required to conduct a formal procurement. (added 11 October 2023)

Costs for the project, both levels and justification, are to be covered in the value for money section of the SHDF Wave 2.2 application form (to be published in due course). Guidance is provided on how the costs should be justified in the application form, including the requirement to engage with suppliers on costs.

It is not anticipated that all projects will have existing contracts in place and procurement will need to take place after notification of award. In this case, it is critical that the bidder outlines their approach to procurement and how cost variances will be managed as part of the Application Form.

How does the requirement to only use co-funding in the final 12 months of delivery work on a 50% funding model? Do applicants need to get a balance of funding so that less match/co-funding is spent up until March 2025, then balanced out to 50% with spend from then up to 31 March 2026? Or would any spend March 2025-March 2026 be entirely from the applicant, over and above the minimum 50% co-funding? How would total spend for a project be evidenced for the final funding payment if the project is still ongoing? (added 11 October 2023)

Where projects anticipate they will utilise the longer delivery window out to March 2026, with only co-funding used after March 2025, it is acknowledged that equal parts co-funding and grant funding will not be possible at every stage of the project. Projects must as a minimum spend 25% of co-funding by 31 March 2025 to demonstrate their commitment to co-funding.

It is expected that all grant funding will be spent by March 2025 and the remaining profile of spend is consistent with the approach detailed above.

At the end of the project, evidence will need to be provided to DESNZ to demonstrate the co-funding requirement, of a minimum 50% of total spend has been met.

“…lead applicants that underspend…may not receive this underspent grant in the following financial year” – should these works that aren’t completed just be dropped if funding is not available to pay for them? What about if there is overspend due to the planning process completing quicker than expected for example? (added 11 October 2023)

Once a grant funding amount is agreed with successful projects, projects will be expected to spend this full amount in financial year 2024 to 2025. Projects that spend below the agreed grant funding amount should not expect to have their grant spend extended into financial year 2025 to 2026. Projects should explore options around co-funding to ensure they can still deliver to the agreed scope.

Can you confirm that all ‘eligible costs’ do include paying contractor invoices for retrofit works included in our bid? Accepting that we do this at our risk if the bid is unsuccessful. (added 11 October 2023)

Eligible costs that are incurred from the date of competition launch can be counted towards the co-funding requirement of the project (the costs cannot be ‘claimed back’).

Section 2.11.3 of the guidance lists a number of eligible costs (both capital and administration and ancillary) for SHDF. Applicants with questions about eligible costs should review this section of the guidance in particular.

However, please note any costs that are necessary for producing a high quality bid to the SHDF fund do not count as project costs and aren’t eligible, and so cannot be counted towards co-funding.

“Eligible costs incurred between the launch of the Wave 2.2 competition and the signing of the GFA may be counted towards a project’s co-funding requirement” – would this spend be eligible for SHDF Wave 2.2 funding on the spend directly, or just discount spend post-GFA signing in the delivery of the project elsewhere? Should any spend that is planned before signing of the GFA (and therefore at risk) be accounted for separately in a bid proposal? (added 11 October 2023)

Eligible spend incurred before spending the GFA will be considered towards the minimum 50% co-funding contribution of the bidder. It therefore should be accounted for when demonstrating co-funding contribution at application stage and will need to be evidenced during delivery to show that committed funds were spent.

What will payment KPIs be? And how will they vary for partners within a consortium that may be at different stages? (added 11 October 2023)

An overview of payment processes can be found in the Guidance document in section 5.3.

What are the conditions of payment? (added 11 October 2023)

An overview of payment processes can be found in the Guidance document in section 5.3.

How flexible is the deadline of 31 March 2025 for the grant money to be spent? (added 11 October 2023)

All grant funding must be spent by March 2025. Projects may utilise a longer delivery window out to March 2026, with only co-funding used after March 2025.

Can contractor retentions be claimed for under the bid value, and if so, how would that fit within the required claim windows? (added 11 October 2023)

No, contractor retentions cannot be claimed for.

Application process

As a registered provider can we submit 2 bids, one for our own stock, and one as a lead support for smaller entities as part of a consortia? (added 11 October 2023)

Yes, multiple bids from one applicant are permitted provided the same properties are not included in multiple bids.

Lead applicant region: Some guidance would be appreciated on definitions of regions when completing the application form. (added 11 October 2023)

Please use ONS Geography – Boundaries for regions in England to check which region an area falls under.

Modelling at bid stage

Does the principle on bill decreases take into account the general increase in fuel bills, for example installing an air source heat pump might not deliver a huge bill saving just due to the increasing cost of electricity? Can I use methods such as actual bills to evidence a bill reduction to strengthen my application? (added 11 October 2023)

Evidence of bill decrease should be based upon modelling via Full SAP, or PHPP as an alternative. DESNZ requires homes to reach EPC C, and modelled evidence needs to be provided to support this. Any further evidence beyond modelled improvement to EPC C (for example, submission of actual current bills with estimates based on future bills post retrofit) will not further benefit an application compared to the bill improvements evidenced through modelling.

Can the PHPP modelling tool be used as an alternative to SAP? (added 11 October 2023)

Yes PHPP is a recognized tool for domestic energy model in PAS2035 in assessing and designing your retrofit projects however for compliance with the SHDF Wave 2.2 funding you will need to demonstrate that the dwellings that have been retrofitted now meet an EPC C rating.

What EPC data do we use if RdSAP data is considered not desirable. It was mentioned earlier that guidance will be issued about how we measure the ratings of our buildings. What will that look like? What measure can we use to benchmark the homes? (added 11 October 2023)

It is recommended that Full SAP is used as the acceptable modelling methodology as it would demonstrate the applicant fully understands the technical challenge they are undertaking. PHPP would alternatively be an acceptable method of modelling the design intent.

Whilst recognising that RdSAP can be used for PAS 2035 dwellings, we would prefer a higher level of modelling and more accurate level of energy demand estimation than RdSAP for the purposes of setting performance targets for this project, in alignment with the PAS 2035 standard (preferably Full SAP software).

It is acceptable to use recent EPC certificates combined with stock analysis at the application stage of the proposal.

How do you propose we measure or model bills? Should SAP calculations be used or should we make estimates based on Ofgem energy price caps? (added 11 October 2023) 

Evidence of bill decrease should be based upon modelling via SAP, RdSAP or PHPP as an alternative. Applicants should show starting SAP score and modelled end SAP score for every archetype where low carbon heating is proposed. This does not replace the requirements for dwelling assessments under PAS2035.

If there is a property with known failed cavity/loft insulation what should the start EPC score be? Do you take the EPC score of the property assuming the insulation is not present? (added 11 October 2023) 

The focus of SHDF funding is social homes below EPC C. To be eligible for inclusion in an application for SHDF funding (except for on an infill basis), any social home with a valid EPC currently at or above EPC C would need, at the point of application, to have either an updated EPC assessment to prove that it was below EPC C, or it would need to be proved to be below EPC C as part of the retrofit assessment process. Acceptable evidence as part of the retrofit assessment process must be based on government approved SAP 2012 or SAP 10.2 software.

Therefore, in the case of a home at or above EPC C with failed cavity/loft insulation, it is likely to be the case that either the insulation will need to be removed pre-application and evidence be provided in the application that the home was now below EPC C as in the above paragraph, or the home would not be able to be included in an application.

If a social home starting below EPC C had failed cavity/loft insulation and was to be included in an SHDF Wave 2.2 application, with the failed insulation proposed to be removed and replaced as part of the application, applicants may if they wish to outline how this removal would alter the starting SAP score of their home. Any such approach would have to be clearly outlined in response to question 2.1b) of the application form (to be published in due course) and would be anticipated to at a minimum include the starting SAP score, the number of SAP points from the measure in question, and the starting SAP score of the home without the presence of the measure.

Is there a certain proportion of homes that applicants have to have full information of starting condition on in the bid, compared to the use of ‘gap data’? (added 11 October 2023) 

DESNZ are expecting the data used to identify stock for retrofitting to be of a high quality. As outlined in question 2.1b), the starting point for the starting conditions of homes is expected to be SAP, RdSAP or PHPP. It is acceptable to use recent EPC certificates combined with stock analysis at the application stage of the proposal. At application stage, some applicants may wish to also consider other information, such as in person surveys and full retrofit assessments, to provide additional confidence on the starting condition of homes.

In response to question 2.1b), detail should be provided on the proportion of stock in the bid covered by the methodology used to provide data on the starting condition of homes, and the proportion of stock in the bid where assumptions have been made on starting condition based on data from similar properties (meaning gap data). An assessment should be made of how the proportion of gap data included impacts the overall quality and accuracy of bid data.  It is recognised that there is a balance between high quality data and the resources required to collate data sets at bid stage. It will be for each applicant to decide on this overall balance with the higher scoring answers likely to provide additional confidence on the real-world condition of properties, beyond just the use of SAP/RdSAP/PHPP and any stock modelling that may have been done.

If a home is EPC C or above according to a valid EPC, then it cannot be included in an application unless either an EPC assessment is carried out showing that it is below EPC C, or a retrofit assessment is carried out and as part of the retrofit assessment process the property is evidenced to be below EPC C. Acceptable evidence as part of the retrofit assessment process must be based on government approved SAP 2012 or SAP 10.2 software. This would have to be evidenced at the point of application.

We wish to apply with a tower block with combustible EWI on (confirmed by building surveyor’s report). The EWI needs to be removed (Building Safety Funding has been secured and the intent is to blend the funding). At present around a third of the properties are EPC C.  The rest are EPC D or below. Without the EWI, the homes would be at EPC D or below. (added 11 October 2023)

The EWI will not be removed before bid submission – given the special case of combining with building safety funding, can we make assumptions on the starting condition of the homes without EWI even though they are above EPC C to avoid violating the infill criteria?

To allow for efficiencies when working alongside the building safety fund, such an approach would be acceptable.

At application stage, evidence would have to be provided of the securing of funding from the Building Safety Fund for removal of this EWI.

The approach taken to showing the impact of the EWI removal on starting SAP score would have to be clearly outlined in response to question 2.1b) (and associated annex) of the application form (to be published in due course), and would be anticipated to at a minimum include the starting SAP score, the number of SAP points from the EWI, and the starting SAP score of the home without the presence of the EWI.

Consortia bids

In consortia bids, do all consortia members need to sign the Grant Funding Agreement, or just the Lead Applicant? (added 11 October 2023)

The Grant Funding Agreement will be signed solely between the Lead Applicant and DESNZ for consortium applications. DESNZ expects the Lead Applicant to ensure necessary agreements between consortium members are in place. These agreements should ensure the overall funded activities within the GFA are deliverable, and that all consortium members understand the terms and conditions attached to receiving DESNZ funding.

Does DESNZ have any expectations on how the Lead Applicant should manage consortia members? (added 11 October 2023)

DESNZ understands that consortia are formed for a variety of important reasons and so seeks to give as much flexibility as possible to consortia that DESNZ has confidence can deliver on the funded works. However, there are several aspects to consortia management that are essential for the smooth operation of the SHDF scheme and DESNZ requires these aspects to be evidenced at application stage and demonstrated throughout delivery. Please refer to section 7.2 of the competition guidance for these elements.

The competition guidance states that all grant funding for SHDF Wave 2.2 projects must be transferred and spent by the Grant Recipient by 31 March 2025. If I am in a consortium, does ‘Grant Recipient’ apply to just the Lead Applicant, or all consortium Applicants? (added 11 October 2023)

The term Grant Recipient applies to the Lead Applicant in a consortium, and DESNZ in most cases will only interact with the Lead Applicant regarding finance and payments. All grant funding for consortia must be transferred and spent by 31 March 2025, and this applies to all consortia members. Consortium members will need to evidence their spend to the consortium Lead Applicant, who will in turn evidence this spend to DESNZ and receive the corresponding payment.

What will be the requirements for consortia when signing the Grant Offer Letter? (added 11 October 2023)

The Consortium Lead is responsible for ensuring the consortium and all its members comply with the terms, conditions and requirements of the Grant Funding Agreement. The GFA will be contingent on all consortium members entering into a legally binding agreement (a ‘Collaboration Agreement’) which at least confirms all consortium members have read the GFA and associated documents, and agree to the requirements within it. DESNZ will have the right to request and receive information and evidence demonstrating that consortium members are complying with the GFA, and DESNZ will reserve the right to request repayment of the Grant from any individual consortium member where it is reasonable to do so.

Does the lead consortium member need to be in the same region as the homes I plan to treat? If I plan to treat homes across multiple regions, do I need multiple consortia leads? (added 11 October 2023) 

No, bids can be spread across multiple regions. Consortia may benefit from partnering for a variety of reasons, including treating the same archetypes, following similar retrofit approaches, or being geographically similar.