From ECO to Warm Homes: Funding shift for housing

As the UK government refines its dedicated approach to decarbonisation and fuel poverty through the Warm Homes Plan, the funding landscape for housing retrofit is rapidly evolving. With Energy Company Obligation (ECO) funding being withdrawn at the end of December 2026, the public sector is increasingly turning to longer-term, strategic programmes to ensure retrofit and component replacement are considered in unison. The Warm Homes: Social Housing Fund (WH:SHF) or Warm Homes Local Grant (WH:LG) will merge at the end of 2027/28 financial year to provide a single ‘Low income Capital Scheme’ . This transition from short-term, measure-led interventions to longer-term planning reflects a wider move to seamlessly integrate energy efficiency with asset management, building overall safety and resident wellbeing.

For social housing providers, this transition has potential implications across both street properties, low rise and Higher-Risk Buildings (HRBs), requiring a more strategic, planned approach to energy efficiency and building improvements works.

Moving away from measure-led delivery

ECO is a government energy efficiency scheme in Great Britain designed to tackle fuel poverty and help reduce carbon emissions. With 4 iterations, the third scheme closed on 31 March 2022, and the last order came into force in July 2022. The last iteration applies to measures installed from 1 April 2022 and will cover a four-year period until 31 March 2026 (which has recently been extended to December 2026).

The ECO scheme works by placing a Home Heating Cost Reduction Obligation (HHCRO) on medium and large energy suppliers. Under HHCRO, suppliers must promote measures that improve the ability of low-income, fuel-poor and vulnerable households to heat their homes. This includes actions that result in reduced energy usage, such as installing insulation or upgrading a heating system. The overall target for these measures is divided between suppliers based on their relative share of the domestic gas and electricity market.  

ECO has traditionally supported retrofit through specific individual measures delivered on a property-by-property basis. In contrast, the Warm Homes Plan has an ambition to prioritise:

• Whole-building and whole-stock planning
• Fabric-first principles
• Long-term carbon reduction
• Resident health, safety and comfort

This strategic shift encourages social housing providers to align retrofit programmes with asset management, building safety, and compliance strategies, specifically relevant for HRBs where so many different workstreams require close scrutiny and coordination.

Street properties and low-rise blocks: Planned retrofit at scale

Warm Homes funding has the potential to support coordinated improvements programmes rather than reactive upgrades. Key considerations for this funding include:

• Establishing a clear baseline of stock condition and energy performance
• Sequencing works to mitigate disturbance to residents
• Ensuring full compliance with PAS 2035 and associated retrofit standards
• Integrating energy efficiency works with wider property investment plans 

By implementing a strategic approach, this would allow improvements to be delivered consistently across local communities to a very high standard, improving outcomes and value for money.  

Higher-Risk Buildings (HRBs): Aligning retrofit with building safety 

For Higher-Risk Buildings such as residential towers and multi-storey blocks, the transition to Warm Homes funding sits alongside continuous building safety and legal compliance requirements. In terms of retrofit delivery in HRBs, the following must be carefully considered:

• Fire safety and building safety legislation
• Interface between energy efficiency measures and existing building compliance
• Resident engagement in complex, occupational environments
• Phased delivery to manage risk and access

Warm Homes funding enables the perfect opportunity to align decarbonisation works with fire safety upgrades in addition to wider component replacement works, ensuring HRBs are not only more energy efficient, but safer and more resilient for the long term. 

Why skilled social housing contractors are essential

Delivering Warm Homes programmes across both street properties, low rise buildings and HRBs requires a construction partner with deep experience in occupied social housing environments. Early collaboration during programme planning and funding transitions is essential for successful delivery. They should also be able to understand the technical demands of both the PAS 2035 process (which clearly will be the way forward according to the plan) and HRB work while coordinating several workstreams across live buildings. Maintaining quality, compliance, and resident safety throughout delivery is also key to ensuring successful outcomes. A contractor-led approach allows social housing providers to manage project complexities and ensure they meet all funding and regulatory requirements. 

Implications for housing providers

Warm Homes: Social Housing Fund (WH:SHF) and Warm Homes Local Grant (WH:LG) merging into a single Low Income Capital Scheme provides a more seamless and planned approach to housing retrofit. For social landlords and Local Authorities, this transition offers an opportunity to deliver improvements across all types of properties, aligning decarbonisation, safety, and asset management objectives.

The Warm Homes Plan has widespread potential for long-term benefits, creating safer, warmer and more sustainable homes for residents.   

YPO offer a range of Social Housing Procurement Frameworks & Solutions, designed to help you navigate housing sector challenges and access compliant, cost-effective solutions for wider housing services.