Finalised MEES expected to cost social housing sector £16bn

This represents a change from the government’s preferred position in the consultation, which proposed specifying fabric for the primary metric and smart or heat for the secondary metric. It also extends the compliance date for the secondary metric from 2030 to 2039.

Each property will have a spend exemption of £10,000 for the first metric and £10,000 for the second metric, with each exemption lasting for 10 years from the compliance date. 

A spend exemption sets a maximum on the required spend to improve a home and gives providers additional time to meet the MEES. It means that if a landlord has already spent £10,000 but the property does not yet meet the first or the second metric, there will be an exemption from the standard for 10 years, from either 2030 or 2039.

Social landlords will have a transition period until 1 April 2030, and properties that achieve the current EPC C standard will be considered compliant with MEES for the duration of the validity period of their EPC.

“Whilst EPC reforms are still being finalised, this will give providers certainty that they are able to carry on with existing plans to reach [EPC] C by 2030 and then pursue... MEES compliance under the reformed EPC system between 2030 and 2039,” the response said.

Earlier this month, the government said it has delayed its EPC reforms to the second half of 2027, having originally planned to launch the new certificates in October this year.

Alongside its response, the government also published a finalised impact assessment for the new MEES.

Based on the final standard, the government expects the costs to total £16.1bn, of which £6.6bn will be for local authorities and £9.5bn will be for private registered providers.

By 2030, the sector will have installed measures in 1.1 million homes as a result of the regulation, according to the government’s estimates. This will rise to 2.9 million by 2039.

But the total number of homes reaching EPC C by 2039 is expected to be below this, at 982,000. 

The average cost per home is estimated to be £5,276. JLL has previously estimated that the actual cost of bringing properties up to EPC C could be much higher, with providers spending up to an average of £12,000 per property.

Based on housing association capital costs to 2039, the impact assessment also suggested that spending on MEES will result in between 30,000 and 60,000 fewer homes being delivered to 2040.

The government said this “opportunity cost” is likely to be an underestimate, because it only captures private registered provider supply, and does not take into account the reduction in sector financial capacity as a result of reduced income due to lower supply.

However, the impact assessment highlighted that analysis by the Regulator of Social Housing suggests that most landlords “have already factored in some of the cost of energy efficiency improvements” set out in the MEES.

The Chartered Institute of Housing (CIH) welcomed the publication of the government’s response to the consultation and the impact assessment. 

Matthew Scott, CIH policy manager, said: “Having a warm, comfortable home is the cornerstone of our health and well-being, and essential for our ability to thrive. 

“CIH therefore welcomes today’s confirmation of the final design of MEES, and the way that the government has engaged constructively with housing professionals across the social housing sector to refine the original proposals and options assessment.

“These refinements will ensure continued investment towards the 2030 statutory fuel poverty target while maximising capacity across the sector to build new homes.

“As the focus intensifies on delivering to the initial 2030 deadline, CIH will continue to work with our members and the government to ensure that the intended outcomes of the policy – warm, safe homes for social housing residents – are achieved in practice.”