Wave 3 of the Social Housing Fund (“SHF”), formerly Social Housing Decarbonisation Fund, marks the largest investment yet in energy efficiency for social housing in England which aims to support energy performance measures in social homes in England. With £1.29 billion allocated across 144 projects, this wave is ambitious in scale, delivery, and expectations.
Key Features of Wave 3
Delivery Window: April 2025 to September 2028
Spend Deadline: All grant funding must be spent by 31 March 2028, with projects only able to use co-funding in the final 6 months of delivery.
Funding Routes:
- Challenge Fund: For most applicants, with phased delivery and standardised conditions
- Strategic Partnerships: For experienced providers delivering at scale (circa 4,000 homes)
Eligible organisations:
- Local authorities
- Combined authorities
- Registered providers of social housing
- Registered charities that own social housing
Eligible Properties:
- EPC bands D–G (core focus)
- EPC C+ homes where low carbon heating measures are being installed, this is limited to 10% of homes or on an infill basis
- Mixed tenure blocks can be treated in their entirety if no more than 30% are non-social homes in the application and as long as 30% in the block/terrace are social homes, shared ownership homes fall under Wave 3 infill policy on non social homes.
| Home Type | Limited |
| Non social homes within an application | 30% |
| Non social homes within a block/terrace | 70% |
| Homes at or above EPC band C within an application | 10% |
Whilst Wave 1 homes are eligible as long as they comply with eligibility requirements and only where low carbon heating measures are being installed, homes treated in Wave 2 are not eligible.
Cost Caps:
- £7,500 per home regardless of starting EPC band or wall type. This cap can be averages across homes, including across different consortium members.
- Additional £7,500 for off the gas grid low carbon heating.
- Up to £20,000 per home for a maximum of 10% of homes in application can gain access to a £20,000 grant fund to install low carbon heating measures on the gas grid.
Spend Profile Compliance
Funding must be spent in line with the SHF profile:
- 40% in FY25/26
- 40% in FY26/27
- 20% in FY27/28
Grant recipients are required to spend around 1/3 of their grant in each financial year with all grant funding transferred and spent by 31 March 2028.
Above we have outlined some key features of the funding scheme, though for full detail it is important to refer to your grant agreement and the scheme guidance.
What this means for Audit and Assurance:
Wave 3 introduces greater flexibility in delivery but DESNZ requires an ISAE 3000 assurance engagement, using an engagement letter and report format provided by them.
This report had to be provided to DESNZ within six months of the end of each Financial Year (31 March) i.e. 30 September. However, DESNZ can, at any time during and up to three years after the conclusion date, conduct additional audits.
The reporting accountant is required to reach a conclusion that in their opinion the schedule was prepared in all material respects, and that expenditure had been incurred, in accordance with the Grant Funding Agreement or report a detailed list of issues leading to qualification of the opinion. The Grant Funding Agreement details an eligible expenditure schedule and references to the scheme guidance for eligible expenditure, as such the reporting accountant would have to report any costs which are not in line with the scheme guidance and/or eligibility schedule.
As part of the reporting accountants role they would have to test that expenditure has been incurred in line with these conditions and we would tailor our testing to yourselves. Any modifications or novation’s agreed with DESNZ should be put in writing to ensure that the reporting accountant can confirm that DESNZ agreed these changes.
Operating as a Consortium:
Many SHDF Wave 3 projects are delivered through consortia, often led by a local authority or housing association and involving multiple delivery partners. While this model enables broader reach and resource sharing, it introduces additional complexity from a grant assurance perspective.
Lead Partner Accountability
The lead organisation holds the grant agreement and is responsible for the entire grant spend, including that of consortium partners. This means:
- Consolidated financial oversight is essential
- Partner expenditure must be eligible, evidenced, and compliant
- Any disallowed costs, even if incurred by a partner, may be clawed back from the lead
As such it is essential that you ensure that your consortium are fully aware of the eligibility and audit requirements.
What to do now
We are supporting Wave 3 funding recipients with tailored assurance services. Do reach out to us to discuss your requirements and how we might be able to fulfil them.
