Stepping out -recommendations for mainstreaming climate change adaptation of England's social housing stock

Published with my PhD student hat on. These thoughts relate to my research for that and not to any of my day job roles.

At Futurebuild today I will be raising that we need to tackle institutional barriers to climate informed decision making. Particularly those involved in knowledge flows, of delaying and inhibiting knowledge sharing. So today I step out, and put the ideas I submitted in my first thesis draft back in 2016, reviewed and tweaked last year, on the table. I should wait until it is published, peer reviewed, but really, will my academic examiners be best placed to judge the recommendations? Most likely they will say the section, my ideas for change, is not 'empirical' or theoretical information and so doesn't belong in such detail in the thesis.

So before they gather any more digital cobwebs I set the recommendations out here. Apologies for the language, a little academic, I've popped in an extract from my conclusion first to give some context and then set out the recommendations -more general first and then specific to the social housing sector towards the end. Some of you might want to just head straight to the recommendations.

A '...' means i've removed a quantity of text.

Extract from conclusion of thesis (not yet published) - Transition Pathways in Practice - Mainstreaming climate change adaptation of existing housing stock in England's social housing sector

The introduction highlighted that the majority of the UK’s existing housing stock was not designed and built with the changes in climate in mind that we are already experiencing and expect to experience over the buildings’ lifetimes. Yet, despite the state taking action through its delivery bodies to prepare the market with climate information in a number of ways (see Table 11?1), climate change adaptation activity among providers of housing to some of the most vulnerable people in the UK has remained confined to a few exemplar projects. This thesis has examined why climate change adaptation activity is not an established part of workforce practice within England’s social housing sector and sets out in this chapter what can be done to redress this.

Whilst the successive focus of government programmes and funded research on technology and modelling of physical assets has established that the capability to assess and understand the risks presented exist and can be incorporated into existing practices, the focus on translating the information for the business case, has been on quantification and estimating costs of solutions. This does not address the socio-technical structure of the sector and the strong market-based forces acting upon it, and such attempts for the most part have failed because the business case is often flawed from the start. The appraisals used to acquire new stock or land on which to build new homes often strip down to the minimum asset management costs to enable the provider to increase the land value. It is these types of working practice that, if not changed simultaneously with a stock modification programme, will continue to make climate change adaptation a non-viable proposition, and one seen always as a niche rather than mainstream activity.

During the course of this research, the social housing sector has become fully privatised, albeit with a brief wobble in ONS rulings in the period 2015–2017(ONS, 2015b; ONS, 2017), with a final ruling by the Office of National Statistics that ‘registered providers of social housing in England are private market producers and as such they will be reclassified to the private non-financial corporations (S.11002) sub-sector (ONS, 2017), which is reliant on its borrowing power and therefore the investment chain servicing that borrowing power.

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Those staff members involved in climate change adaptation activities were often both simultaneously protected and bounded by operating in a discrete project, outside the normal working practices. Often lean methods had been applied to working processes of housing associations, which renders time for thinking, testing different ways of working and learning from best practice and project evaluation, timely and inefficient – there this a hidden set of transaction costs, which were observed to act as a barrier even if not identified formally by staff.

Staff members not involved in niche activity did voice that action was more likely to be mobilised in response to residents’ complaints or fear of litigation or if it helped to reduce expenditures. This is counter to the precautionary approach conventionally used to tackle environmental challenges. It is suggested that the conflict between the reactive nature enshrined in working processes through regulation, particularly HHSRS and the precautionary approach that is at the heart of adaptation action, even to risk assess stock against [climate change] projections, inhibits the agency of climate change adaptation pioneers in social housing providers.

Climate action did succeed in being mainstreamed in association with a low carbon agenda and, whilst there was policy support at the time, there was not the enshrinement in legislation that is now in place through the amendment to the climate change act to commit the UK government to reducing greenhouse gas emissions to net zero by 2050. The most successful climate action activities that members of staff across the providers seemed aware of neatly fitted with the state narrative that low carbon building and retrofit projects support and help address fuel poverty and deliver emissions reductions. In addition, mitigation activities are primarily delivered through technocratic solutions that have supporting policy, legislation and funding underpinning their development, deployment and scaling – there are clear market services that can be delivered at scale (i.e. insulation).

Coordination of the state, market and housing providers at the organisation level was normally experienced through changes to policy, regulation or pump-priming of the market by government. The knowledge dissemination systems within the housing providers and the strong links senior managers maintain across the sector through their respective trade associations and the conferences they run, seem to be the conventional modes of instigating change in the sector. Operational working is geared to rapid hierarchical dissemination of information, programme goal alteration, sector reaction and interpretation of requirements to change. This means that there is very little within the formal regime structure that provides spaces for critical reflection that enables practitioners to make sense of new information, share experiences (including what did not work) and develop new operational procedures within, rather than dictated to, the sector. The few examples available that have studied adaptation activities came about or were encouraged from an idea into a defined project as the result of peer-to-peer informal or formal though discrete funding programmes e.g. ‘Design for Future Climate’ working across organisations, often through sharing of practice with colleagues with similar roles in organisations of similar stock holding size. The higher up the hierarchy, i.e. at the Head and Director level, the more likely the participant was to mention knowledge and/or involvement within, formalised and established groups. The middle-management level contains a myriad of peer-to-peer working practices in the shadows through individuals’ personal networks, which relies on individuals to take initiative.

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Awareness of risks posed to stock residents and staff by extreme weather associated with climate change was quite consistent among staff within the different providers, although climate change adaptation and mitigation were sometimes confused. Knowledge structures were strong, albeit hierarchical, although senior management tended to be more likely to access new knowledge via networks, trade press and external events. Should mass change capacity building be required in housing association staff, it appeared irrespective of size of organisation, that knowledge dissemination structures were in place, adhered to and taken seriously by staff.

There was a heartening awareness in the majority of respondents that their residents’ welfare would be a fundamental enabler corporately and many referred, unprompted, to the vulnerable nature of their tenants. Balancing that was an equally strong emphasis and awareness of national policy or regulation as a driving force for internal prioritisation of expenditure and condoning of activities.

Aware of its current absence, a number clarified their point of it being a barrier and that unless climate change adaptation was required, enshrined in legislation or funding conditions, it was unlikely it would become a mainstream business consideration.

It was evident that although there would be a likely positive corporate predisposition towards welfare of residents, which might be enshrined within the organisation’s mission and/or embedded in it historically from its origins and past, this would still be secondary to the policy requirements by the state for greater housing growth.

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However, the majority of barriers [to climate change adaptation of stock] tended to originate as a result of wider built environment professional fragmentation, market failure and state regulation dominated by the need to supply housing numbers within a green economy, often in conflict with measures required to adapt buildings, sometimes enhancing adaption requirements.

In practice, this is often translated as ‘cost’ as a barrier, but when questioned further, the response about cost was either qualified by or related to a lack of political prioritisation, lack of funding caused by recent cuts and other competing priorities on limited resources.

Whilst at the social housing provider level, culture and narrative reflected strongly the welfare ideology under which social housing was born, the workforce’s key barriers related to the erosion and weakness of the ideology of a welfare state. There was very few resources, and insensitive work-arounds required applications to novel funding streams outside of housing in order to assess and plan works to protect those most vulnerable in society, an inconvenient consequence of rational market action.

In the battle of ideologies underpinning policy making and regulation, welfare lost out to neoliberal growth, with the belief that the market would ‘correct itself’ in time.

In the history of housing so far, these ‘corrections’ have tended to be state led after an incident or series of incidences necessitate sate intervention, fire being a well-documented example.

These findings in relation to barriers encountered through evolution of knowledge and action to improve the quality of housing now and in perpetuity with respect to the risks presented by climate change are also reflected in a sector-wide review of fire safety and building regulations instigated after the Grenfell Tower fire tragedy[1]. Dame Judith Hackitt, who oversaw the review, surmised in her forward the following:

 “[the] key issues underpinning the system failure include: ignorance… indifference… lack of clarity of roles and responsibilities… inadequate regulatory oversight and enforcement tools… [and that these] issues have helped to create a cultural issue across the sector, which can be described as a ‘race to the bottom’ caused either through ignorance, indifference, or because the system does not facilitate good practice. There is insufficient focus on delivering the best quality building possible, in order to ensure that residents are safe, and feel safe” (MHCLG, 2018, p. 5)

Whilst the wider systemic failures of the sector are now publicly aired through the Hackitt review and acknowledged as needing to be addressed, it appears the process of market correction is underway, just under 30 years after the 1992 United Nations Framework Convention on Climate Change, global market forces are signalling they will be taking action.

[1] On 14 June 2017, a fire in the 24-storey Grenfell Tower block of flats in North Kensington, West London, caused 72 deaths, many others were injured and 223 people are known to have escaped. The then-Communities Secretary Sajid Javid and then-Home Secretary Amber Rudd commissioned an independent review of building regulations and fire safety, which was led by Dame Judith Hackitt.

TCFD - a hero or a lag story?

The investment chain’s interest in physical climate risk disclosure is growing. The recommendations of the Task Force on Climate-related Financial Disclosures (TCFD, 2019) are gathering global momentum through recognition by credit rating agencies, many of whom have signed up as supporters of TCFD — Beyond Ratings, Moody’s Corporation, Rating and Investment Information, Inc. and S&P Global (TCFD, 2019) — signalling that the investment supply chain is starting to move into action and to have interest in the impact of physical climate risk as well as transition risk, on assets. The Bank of England has signalled a forthcoming stress test of the UK financial system’s resilience to the physical and transition risks of climate change in 2021, integrating climate scenarios with macroeconomic and financial system models (Bank of England, 2019) and the UK Government has set out in the ‘Green finance strategy’, with “its expectation for all listed companies and large asset owners to disclose in line with the TCFD recommendations by 2022” (BEIS, 2019, p. 8). This type of disclosure includes physical climate risks to assets.

It would seem therefore that there is a period of a year or two for a potentially orderly transition, if the sector, professions, market and state align, in which the private providers of social housing can assess the risks posed to their stock.

What would be important in this process would be to do so in a manner that accompanies risk assessment technologies with preferable financial products for adaptation programmes to limit both the reactionary response of fear of devaluation of assets once risks are disclosed as well as the reactive mass pre-emptive dumping of stranded assets.

The market, however, should not be given a ‘hero’ role for finally taking action. The lag is substantial, and in that lag, many units have been and continue to be built that are known to present an adaptation burden for landlords and owners, thereby placing some residents, particularly those vulnerable owing to age and/or pre-existing health conditions, at, what some might consider, unacceptable risk.

This has been pointed out repeatedly by the Committee on Climate Change (CCC, 2016b; CCC, 2019a; CCC, 2019b) and MHCLG itself has published evidence of current new build homes overheating, and not adhering to basic regulations on air exchange (MHCLG, 2019), which, from the content, suggests data was captured in 2015–2016, quite a delay in publication, could be considered suppression.

Why has the length of this lag been not just been tolerated but supported and enabled through the state simplifying regulation and guidance? It would appear from the analysis presented in preceding chapters that the state is in an ideological conflict and has not intervened because of the dominance and its adherence to the neoliberal growth ideology through current policies, intrinsic ties between house building, home value and the nation’s economy as well as political ambitions of those in power. There is the possibility that the market will start to police itself and act, but some might consider this as a period in which there was a failure to act and might further indicate that the state should have intervened given the warnings and recommendations made by the Committee on Climate Change. The lag is at least over a decade if being generous, given the 2008 Climate Change Act and provision of the 2002 and 2009 UK climate projections, although awareness of the impacts of climate change has been available since the United Nations Framework Convention on Climate Change in 1992.

When the market fails to act is when a state with a welfare ideology at its heart would step in to act. The CCC in their ‘UK housing: Fit for the future?’ document calls for the mass retrofit of existing homes to be ‘low-carbon, low-energy and resilient to a changing climate’, which they go on to qualify as including measures when carrying out “upgrades or repairs to homes should include increasing the uptake of: passive cooling measures (shading and ventilation); measures to reduce indoor moisture; improved air quality and water efficiency; and, in homes at risk of flooding, the installation of property-level flood protection” (CCC, 2019b, p. 9).

The UK does have a wealth of scientific and engineering capability and is capable of setting up (possibly revitalising those once set up and since dismantled) the necessary boundary organisations to work between the fragmented professions and the green finance industry to deploy a nation-wide programme of minimum low-regret adaptation measures alongside energy efficiency improvement works and the usual intervention points in the life of a home — either through scheduled maintenance works and/or when rooms are due for refurbishment or a home is extended or modified structurally in some way. Investment will likely be needed to rapidly upgrade underlying stock condition datasets or insurers encouraged to share the datasets they have amassed in co-beneficial programmes.

However, simultaneously, the built environment market players must be coordinated to establish how to tackle value against physical climate risk disclosure, how that relates to land value and how they should consider that in relation to their respective professional ethical code of conducts and not with respect to the plight of maintaining property values in a way that externalises impacts on the environment and on the environmental quality indoors for occupants.

None of this will work whilst climate change knowledge, science and engineering capabilities are pitched against the growth ideologies and drivers of the house building market and the state.

Towards an orderly transition

There are lessons that can be learned from understanding what has enabled and constrained existing niche-regime interactions to date, but what they suggest is that substantial change to the prevailing institutional norms constructed by the state and house building market in the UK to enable growth targets are required for an orderly transition to occur. For that transition to occur without regulation or policy or in response to a catastrophic event, will require coordinated proactive effort at the professions and sector level to gather legitimacy to shift the current inertia.

Whilst global market forces might provide a push, the supply chains and climate services are not established enough to respond. To build them up requires state support and market demand.

What might provide the breakthrough — the structural alignment currently missing, between the niche arena, the current regime and the broader social-technical landscape — is the reaction of the UK housing market (particularly the contractors, housebuilders, professional service firms that supply these clients) to the global and domestic investment chains’ demands in relation to climate risk disclosure. Build to rent portfolio holders and large landlords, such as providers of social housing, might quietly conduct in-house risk assessments and strand the riskiest assets.

Whilst Government will need to develop mechanisms to deal with, and attempt to pre-empt asset stranding, en-masse reactive stranding of assets, which will benefit neither the state nor the domestic housing market, and confidence in the UK housing market will need to be maintained for the health of the economy, not just domestically but globally. That need for investor confidence might be strong enough to align climate change adaptation with the growth ideology much of the policy, regulatory and contracting frameworks are based on and enable a state supported, orderly transition.

Deemed a ‘reconfiguration’ pathway within the typologies devised by Geels and Schot (2007), a new regime will grow, not from a breakthrough in one technology but through a sequence of changes and innovations in components across the regime. In effect, the regime is reconfigured — fundamental pressures, such as land value and the growth ideologies, will remain but every day working practice for those involved in building provision and maintenance in the UK would have climate change adaptation considerations mainstreamed, as we have seen happen within efforts to mitigate climate change.

If the socio-technical landscape was modified, such that the ideology was changed from the domination of neoliberalism, a gearing towards growth, to one of a gearing towards sustainable development, then this would serve as the co-ordinated goal for action that then would require very little sector-level deliberate transformational and developmental change interventions.However, the current neoliberal ideology, which considers the environment as an externality unless it can be costed in, works against progression of mainstreaming adaptation and so requires transformational and developmental change far beyond the social housing sector to the wider built environment industry regime. It possibly might even require changes in wider societal ideologies and logics in order to adapt or transform the collective understandings that underpin state and market norms, so that, collectively, practitioners incorporate adaptation thinking, consideration and action into their day-to-day practice.

one way to do this might be to work within the pursuit of growth norms and consider a lack of climate risk disclosure and adaptation activity as a risk to investor confidence in a portfolio to growth and yield returns.

RECOMMENDATIONS

Level playing field for the locality, not the national market

Each profession has the skillsets individually and collectively to address the contextual risks and needs of individual dwellings. However, economic rationalisation which prevails across the sectors makes processes efficient by seeking to package up knowledge into a product or service that is replicable and can be deployed at increasing scale regardless of geographical context... [What is needed is] to focus on co-ordination and convergence of knowledge, with effort going not into packaging it for replicability but on refining speed, time and expertise in making the knowledge and solutions acquired contextually bespoke.

Instead of the expectation of consistency of requirements at the national and local level to make a level playing field for the market, a level playing field for the geographical context should be created, with locally specific expectations of built in resilience to climate change set out.

Such variation should be capable of being delivered and enabled across locally relevant planning and building legislation and frameworks.

For instance, on making the UK Climate Projections usable, as neither the market, nor the Government, nor the Met Office, is doing so of its own accord, there should be a bespoke financial programme publicly deployed through a tried and tested delivery mechanism, such as Innovate UK, with the support of all professional bodies, to bring together the climate and UKRI climate resilience and built environment research community with the professions in order to ensure that information contained in the climate projections about extreme weather (particularly at regional and local levels) is translated into suitable data and information products for use by those working in planning, public health, engineering, architecture -particularly for those involved in stock refurbishment, retrofit, maintenance and in housing management. This includes the small trades not just the sector giants. This programme should also cover the cost of bridging the gap between what has already been developed by researchers and what data layers and tools are required to make them market ready.

Product suppliers and manufacturing community

Stimulating the design, product and manufacturing communities to produce enhanced resilience general renovation materials and products is essential. For instance, kitchens and bathrooms need to be designed that are suitable for high flood risk areas that difficult to distinguish from normal ones and incorporate principles that enable rapid clean up and reinstatement.

Drainage pipes and systems that can cope with low flow rates and heavy downpours are also needed; perhaps guttering sizes need to be bespoke to geographical location. This would, perhaps, necessitate innovation in guttering and downpipe design or, at the more extreme end, innovation in bathroom design. If low flow or no flow toilets are being prototyped by the Bill Gates Foundation, then why not, given the risk of future water scarcity, consider these and their future drainage requirements in the UK?

Consideration could be given to normalising adverse weather deterioration modelling of all materials and products and a clear rating system set up to simplify appropriate selection according to risks posed during a building’s lifetime or the longevity anticipated from the refurbishment works.

As pointed out previously, it would be preferable to pursue an alternative future away from assumed obsolescence to delayed obsolescence.

Financial services

The potential for structuring long-term liability financing of green and climate-adapted retrofit solutions should be explored with lead institutional investors and insurers, as should the question of whether stock should be refurbished to reduce climate change risk. If so, there is the additional question of whether such stock could receive a discount or an extended warranty period.

Climate data and services

Providing information on thresholds might be more useful than detailed projections. If the sector were encouraged to take an adaptation pathway approach, they would want to know the threshold at which the combined vulnerability of stock and occupants renders action needed. That action would need to be identified to occur, where possible, within the existing maintenance and management cycles. For instance, surface water flooding might be an issue for a short time period before the utility company were to upgrade their drainage systems.

Good adaptation and good business planning will account for such interdependencies with supporting infrastructure.

Also, packaging data in a form that can be used by channels already accessed, for example Highways weather alerts, was noted as useful by the local authority Housing Manager (LA6), increasing consciousness of the information, for example in the event of a flood, combining the alert with a probability increase or decrease marker by 2030.

Social housing providers & climate services

It is important to consider whether provider governance processes need to be re-structured to incorporate place-based strategic relations, not just with the local authority in relation to housing supply but in a more strategic manner with regard to adaptation to lobby for consideration within spatial planning of features that reduce rather than increase the impacts of climate change to stock and tenants. To do so would require a bespoke use and assimilation of datasets, a form of climate services, of understanding stock location and vulnerability in relation to spatial planning that could impact the risk. It could be developed entirely in-house or be provided by existing data providers e.g. Landmark, be a module offered by the providers of the template asset management databases. The challenge here to these suppliers is that they need to acquire a climate services division and offering for the social housing sector.

In terms of how this might work within conventional practice, the suggestion is that, just as with new development, where planning applications are monitored within the vicinity of existing stock, to lodge any concerns with proposed design and impact on stock value, so too should changes in spatial planning documentation, standards and planning consents with regard to the providers’ risk profiles and operational activities be monitored.

There should be a clear responsibility for strategic discussion resting with decision makers in organisations whose assets interact with or are dependent upon social housing stock. Such organisations would include utility companies, businesses and community groups also working to reduce the incidence and impacts of climate-related hazards. Mapping out planned investment and activities will enable identification of when interim rather than permanent measures are required e.g. if stock is in an area of high surface water flood risk during heavy downpours but the local water company is due to expand their drainage network within 5 years’ time, then protection against that type of flood risk is needed potentially on an interim basis only and might alter the adaptation measures used.

Coordination of the system of built environment professions

The recommendation is for a coordinating body to be convened by the National Housing Federation, Chartered Institute of Housing and National Housing and Maintenance Forum, with representatives of the relevant sector skills councils and professional bodies (including RICS, RTPI, RIBA, CIWEM, ICE, CIBSE, IET, LI and IEMA) to devise a means for systemic learning to become an industry norm and for clear pathways to be established when new developments require coordinated learning across the system of professions.

It is important not to focus solely on the technological solutions; some of the risks might be created or addressed through changes in norms in design and architecture.

• Is it the technology, or does the technology needed already exist?
• Is the 'innovation' the application of the technology and, if so, what support is needed to change practitioner working narratives and evolve material practices?
• How can this be effected in a co-ordinated fashion across the system of professions so that one field does not hold back others?

Recommendations specific to England's social housing sector

Here's a list summary of what's below specific to England's social housing sector so you can judge if you want to read on/skim to one of these

1. Removing the blinkers: working beyond the confines of the social housing sector
2. Retrofit market transformation
3. Financing new stock and regulation
4. Sector level co-ordination
5. Pooling knowledge
6. Pooling services
7. Pooling resources
8. The SHIFT index
9. Corporate and financial management
10. Housing Management
11. Asset Management

1. Removing the blinkers: working beyond the confines of the social housing sector

Now that the sector is fully privatised, it arguably cannot afford ignore what is going on outside the sector, in the global financial markets. Those operating in the social housing sector will need to consider how overlapping sectors, upon which their sector is dependent, might act. In addition, the potential impacts on their activities in a wider sustainability transition might be affected, which would include, amongst other issues, tackling the need for climate resilience and climate change adaptation of the built environment.

Such points of overlap might present opportunities for pooling of resources and shared efforts. A number of these issues are set out below but others will present risks, particularly financial, for the sector, for example the introduction of home and/or indemnity or other forms of insurance premium re-pricing. For those providers acting as developers and/or energy providers, the impact on cash flow of suddenly finding they are required to contribute to, for example a Government-run national climate defence investment fund and/or face restrictions on the number of units that can be built in a flood plain, impose changes in the planning and building control regimes that result in new build delay — these are all mechanisms that have already been modelled to help inform decision making (Crick et al., 2016) and could be implemented quickly. Therefore, whilst recommendations are set out below, it is suggested these should be considered in relation to findings from horizon scanning of changes in other sectors that might affect the application of these recommendations in the social housing sector, particularly those sectors of institutional finance, insurance, planning, local authority housing strategies, public health, infrastructure (particularly utility and transport provision) and emergency planning and service provision.

2. Retrofit market transformation

Obsolescence of materials and structures and the requirement for major refurbishment on a 30–35-year cyclical basis, in addition to cyclical maintenance, are accepted norms in the social housing sector. Looking to the future, to developments in thinking and standards being set in relation to the notion of the ‘circular economy’, alongside the potential for embedded sensors providing real-time information about building condition, should business plans continue to be made on the assumption of business as usual? Yet, it is not possible to push the market to respond to future demand if coordination of thoughts on what that future should look like have not been conducted. What could asset managers and landlords start to demand from suppliers? A combination of new materials coming onto the market, tested for robustness and improved lifecycles against extreme weather, combined with the aforementioned real-time monitoring and circular economy developments and manufacturing innovation in producing materials for on-site assembly, could fundamentally change the cyclical periods by which asset management conventionally works. Should working practices work with, and to the assumption of, obsolescence or should they be reformed to, as Dr Rob Lawlor (2015) suggests, delay obsolescence.

Having observed the sector events and topics over the past few years, I have yet to come across a seminar that has asked such a question, but I recognise from the findings of this thesis that these events are thematically geared and cannot be representative of the entire level of formal and shadow thought leadership activity underway within the sector. I therefore make all of the following recommendations in the awareness that sector-level activity could already be underway outside of the information available through conference programmes and the trade press.

The Energiesprong initiative mentioned in Chapter 7 is being devised to enable what the project founders believe are the conditions for a net-zero refurbishment market transformation (ESUK, 2016)… Supported by the Committee on Climate Change’s (2019b) calls for combined interventions on energy efficiency measures and adaptation measures, it provides a future window of opportunity for mainstreaming climate change adaptation of existing stock.

... the SHIFT index... could provide the opportunity to mainstream their benchmarking approach by partnering with Energiesprong and providing certification of the stock condition assessment protocols for prioritising stock for retrofit. The stock condition assessment, an underpinning part of the new delivery mechanism, in any case, would benefit from a broader assessment of prioritisation incorporating not just the physical fabric but also consideration of resident vulnerability within the selection prioritisation process.

3. Financing new stock and regulation

The success of retrofit funding is currently measured against number of units delivered rather than the number of buildings to be managed to produce a safe and secure living environment. To avoid new-build stock reducing this latter number, funding for new housing provision should be dependent on inclusion within appraisals of true whole-life costs of stock incorporating climate adaptation works that would be required over the building’s lifetime. This might require work with the Royal Institute of Chartered Surveyors to ensure more effort is invested into understanding the costs rather than accounting for uncertainty

Past mistakes should be avoided, such as running a tightly controlled programme like Decent Homes or the Green Deal that make it difficult to offer a solution suitable for the local context environmental and socio-economic context. The sector and its financial backers are wary now of policy-led initiatives, because change might cause withdrawal of support and funding during committed programmes of work.

Risk proportionality and palatability are factors often avoided in discussions... There is a tendency to assess risks in relation to the physical stock in isolation of the existing risks already borne by providers. At the moment, this knowledge base is being developed by technical consultants and researchers working with research and asset management arms of providers. The regulator is not present, nor considered within the work. However, the degree of risk that providers are willing to assume might not be palatable to the regulator or vice versa. These discussions are unlikely to occur until a catastrophe happens and questions are asked in a public forum. Dan Rogerson MP (personal communication 2014) believes that

“As responsible owners, it is in the commercial interests of social homes providers to carry out flood risk surveys, and we would strongly encourage them to do so”.

As the knowledge base of the impacts of climate change of real stock portfolios (as opposed to modelled buildings) improves, the sector should, if not already, configure itself to discuss with the regulator what constitutes an acceptable level of climate risk sooner rather than later.

Regulation of the sector should require that climate risks are accounted for and that housing providers have plans in place to reduce their exposure; even if regulators will not move to do this, it will be a demand placed in the near future by investors. Housing providers should be required to report their financial exposure to extreme weather at a minimum of 1-in-100 (1%) per year climate risk levels, as per the fifth recommendation of The Royal Society (2014), which provides a ‘stress test for an organisation’s solvency in an extreme event scenario’ (The Royal Society, 2014, p. 88). This is drawn from work by the UN in 2014 that brought together a number of committed partners, including the International Insurance Society, Willis Group and Standard & Poor’s Ratings Services, to integrate natural disaster risk in the financial system. The aim published alongside the statement was to integrate the stress test into wider financial regulation and accounting standards by 2020. If the regulator was taking the issue very seriously, it would encourage a 1-in-20 (5%) risk per year to provide a stress test for providers’ annual accounts whose stock is at risk of failing to provide shelter and a safe living environment in extreme weather events.

It is important to note that the insurance sector uses what they are familiar with — the probability of an event occurring. Whilst this is a useful unifier for various contexts, for the purposes of adaptation planning, consideration of thresholds and making best use of the predictions available, there is a danger that this static approach could dominate and hold back an adaptation-pathways-type approach based on the best due diligence possible for the local context, stock archetypes, resident vulnerabilities and expected changes in environmental conditions.

In time, the recommendations by the insurers might be overridden by any guidance released by the Bank of England in relation to its proposals to stress test against various carbon emission and climate scenarios (Bank of England, 2019).

Identifying the housing stock least robust to adverse weather with respect to different weather extremes is essential to ensuring vulnerable people are not housed in the least climatically robust stock, even if it is the only product on the table to satisfy new housing supply requirements.

Even if there is insufficient money to undertake capital works to the homes, those commissioning and building new homes and major refurbishment works within the social housing sector should be confident that asking the question ‘Have you checked it against the summer temperatures?’ will yield a satisfactory answer. If working in a big urban area, the question ‘Have you made sure you have checked for the external temperature being a bit hotter?’ needs to be raised so that the sector can be better informed of the risks and the vulnerabilities of the stock they are acquiring.

4. Sector level co-ordination

Work within the sector, as conducted by the global insurance sector (the UN endorsed ‘1 in 100 initiative’, a risk tolerance disclosure framework to incentivise companies to be more resilient — see Chapter 7) to establish tried and tested interventions and operational systems for preventing and covering the cost of climate risks, including mechanisms that can be deployed quickly should extreme probabilities become reality. At the same time, guidance and support for residents should be developed to help reduce the risks posed, particularly, for those residents identified as vulnerable to risk.

Key elements in the work include the creation of incentives or rewards for responsible investment, which would represent an opportunity, perhaps, for the SHIFT benchmarking service to work with the green finance community on new products to normalise climate risk consideration and adaptation planning within the new-build development activities of providers of social housing without increasing the risk base of the asset portfolio. This might become increasingly important as institutional investors start to seek assurance on asset vulnerability to climate events.

5. Pooling knowledge

One possibility would be to establish a work group specifically to explore adaptation pathways for the sector based on common stock types and vulnerability of residents to particular climatic extremes.

This would incorporate sharing learning with planners and working on national precedents for listed stock, monitoring of the effectiveness of strategies and adaptive pathways employed, sharing of what works well and what does not.

Essential in this process would be knowledge sharing and testing of business continuity plans in extreme weather events, particularly for refining plans to protect vulnerable tenants and developing sector-specific guidance for integrated climate resilience assessments that account for health and social as well as asset and service provision risks.

6. Pooling services

Another option would be to combine collective efforts, taking a different approach, pooling resources (including expertise) to consider the moral value and legitimacy of the services offered by, or offered at a premium, from external sectors that are required for stock adaptation and resilience.

Key to this would be whether these are new climate services social housing landlords are finding to be needed (perhaps bespoke to a landlord-tenant business) or ones that the market cannot currently provide in an affordable manner, that could be developed in house, perhaps in joint ventures with professional service firms and form a new income stream, and which could be offered as a service to the private rented sector and to individual home owners with homes co-located near to social housing stock in need of climate (adaptation and mitigation) refurbishment options to purchase a low-regrets package see Green et al. (2019) for further details.

For instance, (Zelizer, 1994) argues that moral issues are integral to the creation of new markets, giving the example of ‘life insurance’ as an alternative to deal with the moral ambiguity of putting a price on, and expecting people to pay a premium for, their deaths.

Perhaps something could be done in a similar vein with climate change adaptation, whereby providers of social housing do not have to pay a premium for a high likelihood of a stranded asset, rather they pay insurance to cover themselves for ‘future fit stock’ or ‘homes providing societal benefit’, providing their own warranty and insurance product (as the NHBC does for the building industry).

Whilst these recommendations try to provide alternatives to regulation given the deregulation agenda, consideration should still be given to whether Government regulation is required, particularly if the finance sector, when applying TCFD recommendations, finds it cannot offer insurance, liability and warranty projects for the providers of social housing. This would not just generate a level playing field but could also reassure the public and generate public trust given that individual home owners will be facing the same dilemmas.

In the future, it may become increasingly difficult to insure non-resilient assets, so providers could investigate mechanisms to pool insurance funds for extreme weather events — currently, individual providers are doing this,

but given the geographic distribution of risk and exposure, it might be possible to negotiate better premiums and reinsurance by pooling resources, as has been done with procurement.

This would require the following:

• A clear understanding of the risk exposure of the asset base
• An understanding of where public–private initiatives might enable coordinated efforts to reduce risks jointly shared, for example surface water flood risk and water scarcity.

7. Pooling resources

Pooling of resources could be another strategy employed. Emerging market models such as ‘RetrofitWorks’ provide proven in-practice templates, whereby members pool resources to work together to provide one point of interaction to residents. Behind that exists a bespoke supply chain to suit the works that need to be carried out with a quality assurance process in place, with a possible future requirement for design that reduces climate risk exposure. This would keep the learning within a community whilst keeping competition processes open but allowing locally based knowledge of archetypes and climate risk and solutions and supply chains to deliver all this to build up.

Proactive action by the sector and the ability to pool resources in response to risk exposure might enable access to lower costs of finance:

• SHAP in the West Midlands are already working with members to scope out the potential for insurance-backed warranties for (non-offsite) retrofit — embedded in their vision is energy efficient dwellings that are resilient to extreme weather. This relates to ongoing work in Manchester and is focused on insurance companies and banks that fund housing associations. The delivery is contingent upon developing acceptable technical protocols to support the warranty (SHAP, 2015)
• Develop mechanisms for asset stranding — establish points at which no social nor economic return can be had from an asset and what is done in order not to negatively affect the ability of organisations to borrow against the value of their remaining asset base.
• Substantial asset stranding may require cash flow bailouts — is that something that could be managed or enabled more cheaply through the sector given the geographic distribution of stock? Could partnership arrangements be in place for emergency housing of residents, to reduce capital cost and keep financial cash flow within the sector? Could debt keep being paid off so that the sector as a whole does not have to shoulder increased borrowing costs owing to a few organisations not being adequately prepared or resilient to climate change?

Accordingly, what would otherwise be a cost to the sector could become an income diversification opportunity. The term used in industry for this is ‘cannibalisation’[1], where previous symbiotic arrangements become competitive as one sector takes on the service provision of another, or changes their business processes, or product offering, such that the external sector’s service is no longer required. For example, housing providers could (and some already do) run their own maintenance services and insurance services, but not just in-house.

These unique offerings could include the repairs services that providers of social housing have refined for in-house purposes. As stated by Keith Exford, Chief Executive of Affinity Sutton, in the Smith Institute’s report, “most owner-occupiers couldn’t afford or obtain the kind of repairs service we now offer. We’ve also created a whole industry in responding to antisocial behaviour – our housing managers spend a quarter of their time dealing with it” (Chevin, 2013, p. 61). Providers could put a premium on non-emergency repairs conducted on weekends (as suggested by Laurice Ponting, Executive Director at Genesis in the same report) and use that to fund works such as adaptation of stock outside of business as usual. Moat housing association, which owns and manages over 20,000 homes in the South East of England,  is already starting to deliver a hierarchical 3-, 4- and 5-star levels of service, dependent upon resident compliance with their tenancy agreement, rewarding those who comply.

These repairs services could be offered to the private rented sector (many of whom are home owners with a couple of properties, not large stock-holding landlords). This could be organised on a street-by-street basis, enabling scalable and coordinated local provision of repairs services in the event of adverse weather, e.g. a rapid repair and reinstatement service of ground floors of properties in the event of flooding. From the context of addressing challenges faced by climate change, this would enable a more coordinated approach to tackling supply chain disruption in the event of an adverse weather event, for example flooding, as business continuity plans would be in place on a geographical basis with understanding of the potential extent of demand, thus reducing the logistics involved in getting homes back into use. It would give greater assurance corporately that the supply chain would be resilient, coordinated and able to service housing stock affected.

However, if market competition and income diversification of the providers become focused on organisations cannibalising each other, their efforts are on competing for market share within the existing regime. Such an approach, unless well-structured, might risk entrenchment and incumbency, diminishing motivation to innovate the market, particularly if such disruption would jeopardise an organisation’s own products and services.

8. The SHIFT Index

The index currently provides benchmarking activities, which is in the form or an assessment of physical risk of stock and any measures taken to reduce risk. A change in focus should be considered towards assessing efforts relative to business vulnerability (combining the focus on stock and residents) rather than the current assessment of activity, which is focused predominantly on works to stock. It is already expanding to contractors and could take on a role facilitating and providing technical guidance notes to support many of the recommendations listed in this report.

It also could seek to act as a definitive sector repository for new knowledge created by academic and practice-based research for the sector and seek a form of quality assurance recognition through transparent sharing of its framework with investors. Investors might require quite specific changes to the data collected in order to satisfy the risk disclosure reporting they in turn make on their portfolios.

9. Corporate and financial management

Identifying what is the most cost-effective investment of resources (in terms of capital and staff time and capability) is essential in preventing future losses and stemming inevitable marginal losses. This requires effort in risk assessment, loss prevention, loss mitigation, disaster preparedness and vulnerability reduction, identification of effective supply chains for rehabilitation and reconstruction.

Risk assessment: Resilience planning of those services upon which social housing provision depends should be co-ordinated with an exploration of where all might benefit from preventing loss of common services by pooling of resources in order to distribute and manage the underlying risks. One approach could be to sign up as a supporter to, and reflect internally upon, the TCFD recommendations.

Business continuity planning: Management of residual losses can be achieved through having in place good insurance and disaster recovery mechanisms. However, essential to this is an understanding of the vulnerability and exposure of the extended supply chain across the sector. This is particularly true for providers whose repair service provision is dependent on contracts with companies with high market share of contracts within similar geographic areas. Will those companies be able to service all providers under a state of emergency? Is diversification of the supply chain a preferable resilience strategy?

Strategic acquisitions: If part of the business strategy is to develop Adverse Weather services and stock resilience, such that being prepared and resilient is considered to provide a competitive advantage, then this could require modifications to stock acquisition strategy towards takeovers and stock transfers in pursuit of, and not to the detriment of, continuity of operation and service provision in the face of adverse weather.

10. Housing Management

Included within job roles working with asset management to conduct triple jeopardy (house condition, level of vulnerability of people within and environmental risk) should be a requirement to undertake an annual risk mapping exercise incorporating consideration of triple jeopardy risk mapping results to inform priorities for maintenance and refurbishment programmes.

11. Asset management

As noted above, focus should also be shifted from responsibility for improving the resilience of physical assets to climate impacts to responsibility for providing a safe, healthy living environment (which will also support changes likely to come in via NICE guidelines on indoor air quality), including rapid reinstatement in the event of adverse weather rendering stock uninhabitable. Currently, measurements of voids provide incentive but the focus should be on reinstatement to a healthy living environment.

Recommendations at the sector level would have implications for skills and services covered by asset management teams. These could include providing information in an advisory capacity to local home owners with similar stock archetypes in locations near to social housing stock wanting to know what changes they could make or include within a brief (under Permitted Development). If linked to a warranty system provided by the housing provider, such works that improve resilience could have an opt-in system to have the works carried out and assured by the social housing provider with a warranty and discount on insurance premiums.

[1] I heard this term in a lunchtime seminar given by Ramon Arratia, Sustainability Director at Interface on the 1st August 2016