At a time of extreme energy price volatility, the government finalised two policy interventions in early 2026: the Future Homes Standard (FHS) and the Warm Homes Plan. Together, they accelerate the move away from fossil fuel heating and embed low‑carbon technologies as the default for new and existing homes.

These policies signal a structural shift in how developers plan and cost projects, transforming energy resilience from a sustainability goal into a core commercial requirement.

What is the Future Homes Standard?

The FHS establishes a single national standard for what it calls ‘zero carbon-ready’ new-build homes, targeting a 75–80% reduction in operational carbon emissions compared to 2013 levels. The regulations will come into force in March 2027, with an extended commencement date of September 2027 for higher-risk buildings.

For developers, the most significant change is the tightening of transitional arrangements. Previously, it was possible to apply earlier standards to an entire site if work had already commenced. Under the new rules, any plots not started by March 2028 will need to comply with FHS requirements, mandating a rapid pivot in procurement and site planning.

The standard will achieve its carbon reductions through a fabric-first approach, combined with mandatory low-carbon technologies. With the phase-out of gas boilers, air-source heat pumps (ASHP) and heat networks are expected to become the default heating solutions for new homes. This is supported by a mandate for on-site renewables, with solar photovoltaic (PV) systems expected to provide a power equivalent to covering 40% of a dwelling’s ground-floor area with panels.

To assess energy performance and compliance, the government is transitioning from Standard Assessment Procedure (SAP) methodology to the Home Energy Model (HEM). It offers a more sophisticated assessment of energy performance and will need earlier design-stage co-ordination and more accurate performance data.

What is the Warm Homes Plan?

The Warm Homes Plan focuses on existing housing stock, aiming to upgrade the energy efficiency of 5m homes by 2030. The plan combines grant funding, subsidised finance and targeted support for low-income households to accelerate the uptake of energy efficiency measures and low-carbon heating systems.

For developers and landlords, the plan introduces a critical regulatory driver – it requires all private and social rented properties to reach EPC Band C by October 2030. The Boiler Upgrade Scheme budget has been increased to support this policy, and new finance mechanisms, such as interest-free consumer loans, are designed to broaden access to low-carbon technologies like solar PV and battery storage, further maturing the low-carbon supply chain.

Cost pressures and delivery constraints for UK developers

The transition to low-carbon homes introduces a range of delivery challenges, particularly when considered alongside the government’s ambition to build 1.5m new homes by the end of this Parliament. Current estimates suggest a capital cost uplift of approximately £4,350 per dwelling for FHS compliance, with the combined financial impact across private developers, landlords and housing associations estimated at £7.7bn over the first decade of implementation.

Alongside costs, workforce capacity remains a constraint. The target of 450,000 ASHP installations per year by 2030 is set against a significant skills gap, placing upward pressure on labour costs. Additionally, FHS airtightness and ventilation requirements will demand more rigorous testing at completion, introducing new programme risks for developers operating at scale.

Energy performance is a material factor in asset value

The link between energy performance and asset value is now a material reality. Lenders are increasingly factoring energy resilience into underwriting, offering preferential green mortgage rates for high-performing properties. Conversely, assets lacking a clear pathway to the 2030 EPC Band C standard face ‘brown discounting’ in the secondary market, where buyers and valuers apply a price reduction to reflect anticipated retrofit costs, regulatory risk and reduced marketability.

The measurement of value is evolving, with the planned launch of new-style domestic EPCs in 2027. These will shift from a single cost-based score to four metrics: fabric performance, heating system, smart readiness and energy cost, reducing the ability to mask poor fabric performance behind low-carbon technology.

What developers should do now

With the introduction of the commencement rules, developers will need to update their design plans to make sure projects submitted on or after March 2027 comply with FHS. This increases pressure on developers to accelerate their construction schedules. Given the technical complexity of the HEM, architects, engineers and consultants will need to co-ordinate much earlier in the process to avoid costly mid-project redesigns.

As the 2027 deadlines approach, competition for ASHP and solar PV installers will also intensify. Developers will need to establish robust supply chain relationships early, before demand peaks and contractor capacity becomes constrained. Doing so will be essential to manage both regulatory risk and long-term asset performance.

While these standards increase upfront build costs during a period of economic pressure, they also provide the industry with long-awaited regulatory certainty after years of policy delays. This clear roadmap allows for more accurate long-term land appraisals and procurement strategies, moving away from the reactive compliance of previous years.

Ultimately, developers that meet or exceed FHS requirements early will position themselves favourably with lenders and buyers increasingly aware of energy volatility, while mitigating the risks of future asset stranding and expensive retrofits.

How we can help you prepare for new energy regulations

Our Sustainability and ESG team provides the technical expertise to navigate this shifting landscape. We support clients through gap analyses against new standards, assurance on green finance and enhancing ESG disclosures to ensure projects are resilient and optimised for long-term value. For more information, please contact Rich Hall or your usual RSM contact.

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