Home Energy Model and EPC Reform: Social Housing Roundtable

From One Metric to Three

The current EPC system, based on RdSAP, produces a single cost-based score covering heating, lighting, hot water, and renewables. It has well-documented weaknesses in the current policy context: it penalises electric heating including heat pumps, does not factor in smart tariffs, and conflates the cost difference between gas and electricity with fabric performance. Two otherwise identical properties, one with a gas boiler and one with storage heaters, will have significantly different EPC ratings under the current system despite having identical fabric.

The Home Energy Model replaces this with three separate metrics, each measuring something distinct:

• Fabric efficiency: a score based on heat loss through the building fabric, reflecting how much energy is needed to maintain a reasonable temperature over the winter period, including hot water needs. This is the metric with the most uncertainty about where the band thresholds will fall.

• Heating system: broadly based on the carbon emissions and efficiency of the heating system. Fossil fuel heating, including all gas boilers, will be capped at a D rating or below. Non-smart electric heating faces the same ceiling. Heat pumps, smart electric heating, and low-carbon heat networks are expected to pass.

• Smart readiness: a basket of technologies including solar PV, battery storage, smart meters, EV charging, and other smart tech. This metric remains the least defined in terms of how the components will be scored or combined.

A cost metric will also be produced for information purposes but will not be a policy target.

The Compliance Timeline

The current EPC C by 2030 target will be replaced by a requirement to meet an A to C rating on one of the three HEM metrics by 2030, and a second metric by 2039. Existing EPCs lodged under the current system remain valid until they expire. There will be transitional arrangements for landlords with large portfolios assessed under the current system. Cost exemptions apply: for the social housing sector, any spend from now until 2030 toward the first metric compliance counts toward a £10,000 per property exemption, which then rolls forward for 10 years. A second £10,000 exemption applies toward the second metric by 2039. The exemptions expire in 2049.

Key point: landlords have a free choice of which metric to target first. DESNZ expects landlords to choose the metric that best suits their stock, which creates genuine strategic flexibility but also, as participants noted, creates some scope for gaming.

Likely Pass/Fail Outcomes Under HEM

Matt offered the group his current working understanding of likely outcomes, with the caveat that band thresholds have not yet been set:

• Fabric: well-insulated properties (insulated cavity walls, good loft insulation, double glazing) are likely to be A to C. Mid-floor, mid-block flats are likely to pass. Uninsulated solid walls and single glazing are likely to fail. Properties on the current C/D boundary face the highest uncertainty.

• Heating system: heat pumps and smart electric heating are expected to pass. All gas boilers and non-smart electric heating will be capped at D or below.

• Smart readiness: solar PV and battery storage are likely to pass; solar PV alone is uncertain. EV charging for houses should contribute; the position for flats is unclear.

Strategic Implications for Social Landlords

The Solid Wall Problem

The most significant concern raised by multiple participants was solid wall properties, particularly solid wall flats. These cannot meet the fabric metric through conventional insulation routes at viable cost, and many face additional constraints such as conservation area or listed building restrictions that rule out external wall insulation. Matt noted that a recent project working with London housing associations on heritage stock found that mid-block flats in converted Victorian terraces often already meet the C threshold, with the most difficult properties being those in corner or top positions with greater exposed surface area. Secondary glazing, airtightness improvement, and loft insulation can in some cases get those properties to a C without external wall insulation, but this will not work in all cases.

For heating, switching from gas to electric, whether to smart storage heaters or air-to-air heat pumps, addresses the carbon metric. The cost risk with storage heaters was flagged, but technically it is a viable route. The question of whether solid wall blocks will need fabric intervention or whether a combination of low-carbon heating and solar PV is a sufficient long-term approach remains unresolved.

Investment Strategy: Two Approaches

Matt set out two broad strategic positions for discussion:

• Compliance first: focus on achieving the EPC C target under the current system by 2030, redo EPCs where they are expiring, assess HEM compliance but do not over-invest in the transition until the band thresholds are confirmed. Use exemptions where available under the current system for solid walls, listed buildings, and conservation areas.

• Strategic investment: use the transition to HEM as a springboard for achieving two metrics by 2039. Make investment decisions now that serve dual purposes, replacing boilers with heat pumps during planned replacements, installing solar PV during roof works, using fabric investment to address fuel poverty and damp and mould simultaneously. Choose metric sequencing to maximise resident benefit.

• The higher-risk strategies identified were: large-scale gas boiler replacements in properties near the current C/D boundary (which may drop under HEM), switching non-smart electric heating to gas, and light-touch fabric upgrades in properties already near the threshold. Lower-risk strategies are solar PV and battery storage, heat pump and smart electric heating, and medium to deep fabric improvement.

Air Conditioning and Cooling

A question was raised about whether air conditioning could contribute to the HEM metrics. Matt confirmed that air-to-air heat pumps that provide both heating and cooling would be assessed positively from a heating perspective. The government has made grants available for air conditioning through the broader upgrade scheme. However, for properties where the heating system also needs replacing, the economics of a combined heating and cooling solution versus separate systems are complex and not yet well defined in policy terms. The general steer was that for properties with unresolvable overheating risk, an air-to-air heat pump is a reasonable answer but the detailed pass/fail implications are not yet confirmed.

The EPC Quality and Compliance Problem

A substantial portion of the discussion focused on the fundamental unreliability of EPC data and the disproportionate burden of the EPC assessment process on the sector.

One participant estimated that the sector as a whole faces a cost of over £100 million just in EPC assessment activity between now and 2030 to produce compliance paperwork, money that could otherwise go directly into homes. For a smaller provider with around 900 properties, half with no current lodged EPC, the cost and disruption of a full EPC programme delivers minimal strategic value beyond a piece of paper. Asset management systems already hold years of stock condition data that is more accurate, more detailed, and more useful for investment planning than an EPC.

The quality of EPC assessments was also raised as a serious concern. Different assessors make different assumptions about wall types and construction. Under the current system this produces inconsistent results; under HEM the same problem will persist since the model will still be fed by non-intrusive survey assumptions. As Matt put it, getting properties accurately typed in the first place, before re-running the model, may unlock better ratings for some stock without any physical intervention.

The sector's case: organisations with well-developed asset management plans, robust stock condition data, and long-term retrofit investment programmes should be able to demonstrate compliance through auditable asset data rather than individual EPC lodgements. EPC processes audit the paper; asset management plans audit the strategy and the homes.

Alternatives to EPC as a Compliance Mechanism

A DESNZ representative (Rebecca) acknowledged that the department is aware of the limitations and is exploring alternatives, including post-retrofit certificates and third-party assurance approaches. She noted that for properties using valid exemptions (conservation areas, planning restrictions), EPCs do not capture that context, leaving tenants unable to access accurate information about their home's performance.

Participants converged on a view that the two heating and smart readiness metrics are relatively easy to verify without EPCs, since they are essentially factual questions about what equipment is installed. The fabric metric is harder, but argued that good asset data on insulation status, combined with real-world measurement such as heat transfer coefficient (HTC) testing, offers a more accurate and auditable alternative than EPC modelling.

HTC measurement was described as a practical tool that can be deployed at scale: battery-operated sensors left in a property for three weeks over winter, with a meter reading at start and end, fed into software to produce a result. It is relatively low-cost, low-disruption, and can be combined with a stock condition survey visit. It also produces the heat loss data needed to size heat pumps correctly, and can incorporate humidity monitoring to assess damp and mould risk simultaneously.

The HTC Measurement Approach

A further suggestion was to push for HTC to replace EPC as the primary compliance measurement tool, rather than treating it as an add-on. With 75% of homes now having smart meters, and connected technology being installed at increasing scale through retrofit programmes, actual measured energy performance is increasingly available. HTC is an accurate, real-world measurement; EPC is a modelled estimate with a known error rate of around 40%. The argument made was that HTC provides a far more defensible and useful measure of fabric performance, fuel poverty, and retrofit progress than a modelled EPC score based on assumptions about construction type.

Key Themes and Takeaways

• HEM is a significant improvement on the current system in policy alignment terms, particularly on electric heating and heat pumps, but the fabric efficiency metric carries substantial uncertainty until band thresholds are confirmed. This uncertainty is the single biggest barrier to confident strategic planning.

• Solar PV and battery storage is the lowest-risk route to first metric compliance for most landlords by 2030, where it is physically possible to install. Prioritising this, alongside heat pump replacements during planned boiler renewals, is a defensible and resident-beneficial strategy.

• Solid wall stock, especially flats, remains the hardest problem. The sector needs clarity on whether a low-carbon heating and solar PV approach is sufficient as a long-term answer, or whether fabric intervention will ultimately be required regardless of cost.

• The case for reforming the compliance mechanism is strong and broadly shared. Requiring individual EPC lodgements for every property wastes money, produces unreliable data, and does not reflect the real quality of investment in homes. A shift to auditing asset management plans and investment strategies, backed by robust stock condition data, would be more proportionate, more accurate, and more beneficial to residents.

• HTC measurement deserves serious consideration as both a compliance tool and a retrofit planning tool. Its combination of fabric performance data, heat pump sizing information, and damp and mould risk assessment makes it significantly more useful than an EPC for the purposes social landlords actually need.

The gaming risk in the current exemption structure is real. The sector should not wait for others to exploit it; proactively making the case for a smarter compliance framework, with a credible audit mechanism, is in the sector's long-term interest.