About

About the Home Upgrade Grant Phase 2 (HUG 2)

HUG 2 is a grant funding scheme that has been set up to help LAs provide energy efficiency upgrades and clean heating systems to low-income households. The scheme targets the worst performing (EPC band D-G), off-gas grid homes in England.

A key focus of the scheme is to phase out the use of fossil fuel heating and make progress towards the UK’s 2050 Net Zero commitment. It is also supporting improved household health and wellbeing by reducing the number of cold homes and play a key role in the government’s wider programme of green retrofit.

How is HUG 2 different to the first phase?

HUG 2 is the second phase of the Home Upgrade Grant which builds on the success of the scheme’s first phase that has already allocated £218m to 42 projects covering over 200 local authority areas.

The most important difference in HUG 2 is that the scheme has transitioned away from a competition model used previously to a challenge fund.

This means that projects have been assessed against a minimum set of criteria, rather than competing against other bidders for a limited share of the total funds. All successful applicants are receiving some funding.

How much funding is being made available?

HUG 2 is providing grants from an allocation of up to £700m, with funding being delivered from early 2023 to 2025. 

What properties are eligible?

All properties eligible for HUG 2 funding must be domestic off-gas grid dwellings with an EPC rating of band D or lower.

Eligible households for the scheme must either:

• Have a combined gross annual income of under £31,000, which must be verified, or
• Be located in an economically deprived neighbourhood (based on data drawn from the Indices of Multiple Deprivation 2019)

Private rented sector dwellings are also eligible but are limited to landlords with a portfolio of four properties or fewer. Landlords are required to contribute one third of the total cost of any upgrades.

For more information including the full criteria about eligibility, please see the HUG 2 Guidance for Local Authorities document here.

What is the application process?

The application process involves two application stages, with a delivery assurance check between them. For HUG 2, 20 per cent of funds will be granted as an upfront payment to help LAs resource and mobilise their projects.

• Outline application – Applicants are asked about their project’s size, questions on commercial and delivery assurance, as well as their approach to low income targeting and verification. A Memorandum of Understanding (MoU) is offered to applicants who are successful at this stage. DESNZ awards total funding for the project in principle, which can then be drawn down on throughout the lifetime of the project. The submission deadlines for these assessment rounds have now passed.

   

• Delivery assurance check – This check will assess LAs on their readiness to begin delivery, with a focus on their progress in resourcing and procurement.  Applicants can sit the DAC from 1 April 2023 and the final deadline is 30 September 2024. However, the Department for Net Zero would expect applicants to sit the DAC as soon as they are ready in financial year 2023/24.

   

• Batch application – Housing stock data, measure mixes, and costs for a specific set of ‘ready to retrofit’ homes are submitted at the batch stage. If approved, the LA will draw-down funds from the Department for Net Zero to deliver the upgrades. This final step is then repeated throughout the delivery window.

If you are interested in receiving support for the development of your HUG 2 project, you can find out what help and resources are available to your organisation by registering your interest.