Investors should see the opportunity in ‘energy-distressed’ assets

The idea of acquiring older homes, aggregating them and selling them on to institutions is not a new one. However, few have been able to do this at scale, let alone deliver meaningful improvements to housing quality. That’s because the real opportunity lies not in aggregation alone, but in the ability to identify the delta between poor performance and compliance – and to do so accurately, at speed and at scale.

Until recently, that simply hasn’t been possible.

The market itself is vast. Even focusing narrowly on social housing, there are around 2.5 million homes that need retrofitting, with an estimated investment requirement of £100bn to £135bn.

These are not marginal problems, they’re systemic. But they also represent one of the biggest untapped opportunities in the UK’s infrastructure landscape: a platform for long-term income and decarbonisation, with value-add potential and lower volatility than new build development.

Let’s start with the basics. Because of long-standing issues with the Energy Performance Certificate (EPC) regime, we are systematically overestimating the quality of housing stock. EPCs are often issued based on outdated or incomplete data. In some cases, assessments are little more than box-ticking exercises. The result? Millions of homes that appear to meet regulatory standards but in reality fall short – sometimes by a wide margin.

By aggregating and analysing data from over 15,000 annual retrofits, alongside four billion proprietary and public data points, it’s now possible to generate highly accurate estimates of what a home truly needs and what that investment will yield. These methods combine physical surveys with curb-side diagnostics, thermography and synthetic smart-meter modelling. The outcomes are striking: many homes assumed to be rated at Band C perform more like Band E in reality, meaning the upside from intervention is far greater than previously understood.

This is critical for institutional investors, particularly those with value-add or environmental, social and governance mandates. In many cases, day-one valuation uplift from accurate retrofit planning is sufficient to fund the capital expenditure. What’s more, the fuel bill savings of £400 to £1,100 per home per year, and the carbon savings of up to 2.4 tonnes per home annually, generate material long-term gains – both financial and environmental.

“With the right data, investors can now grade exactly how much ‘energy distress’ they’re willing to absorb, choosing retrofit portfolios aligned with risk, return and impact goals”

For many, the real barrier is uncertainty. Investors are rightly wary of what lies beneath the bonnet of legacy portfolios: damp, mould, cladding issues, fire safety liabilities. Recent court cases and portfolio write-downs have exposed how severe these risks can be. The truth is that with accurate data, it becomes possible not just to price that risk but to mitigate it, too. Knowing which works are required, what grants are available and which costs are typical remove a major blocker to institutional capital.

The market is also becoming more supportive. A growing number of social landlords – Hyde, Clarion, Metropolitan Thames Valley, Southern Housing and others – have structured successful partnerships with private capital to deliver shared ownership, private rented sector and energy-upgrade schemes without taking on reputational risk.

With the right data, investors can now grade exactly how much ‘energy distress’ they’re willing to absorb, choosing retrofit portfolios aligned with risk, return and impact goals. And, crucially, this isn’t just about environmental gain, it’s also about insulation from market volatility. In an era of tight housing supply and rising rents, particularly in the mid and lower-mid market, improving the quality and affordability of existing homes is one of the few places where public benefit and investor return align. 

Retrofit may lack the glamour of cranes on skylines, but the scale, necessity and financial logic are hard to ignore. With energy bills spiralling, new housing in decline and the government scrambling for solutions, it may prove to be the most investable infrastructure story of the next decade. 

Anna Moore, chief executive, Domna