Some new homes in England could still be built with gas heating under planned powers to allow exceptions to carbon-emissions requirements, bringing fresh attention to developments held back by electricity-grid constraints.
The Times reports today, 9 November, that exceptional cases could include isolated developments where adequate electricity infrastructure is unavailable. For smaller housebuilders, that raises the prospect of another route through a difficult and potentially expensive design problem.
There is already an official basis for the story. A government response updated on 16 October sets out plans to permit individual relaxations. The question for a developer is whether that route can apply to their particular site.
The published position has changed since March
The March consultation response rejected allowing Regulation 26, which addresses new-building carbon emissions, to be relaxed at that stage. It argued that sufficient flexibility already existed.
The later building-charges response changes that position. It plans to remove the prohibition on relaxing that requirement where building control considers compliance unreasonable in the specific circumstances.
That is a narrower proposition than allowing developers to choose gas whenever it is cheaper. Today’s reporting brings the implications into focus, but the published policy change predates this week.
Grid costs can change the economics of a small site
For a developer, the heating specification is part of a much larger cost plan. Electrical capacity, connection work, installation choices and the construction programme all need to fit together.
A connection quotation arriving above budget can create an immediate funding gap. A connection date slipping beyond practical completion can be equally damaging: homes may be close to finished while sale proceeds remain out of reach and interest continues to accrue.
Smaller schemes can be especially exposed because a substantial infrastructure bill is spread across relatively few homes. A project with a reasonable margin on its original appraisal may look very different once additional works and several months of borrowing are included.
A permissible alternative design could change those figures. However, gas availability, installation costs and the home’s remaining electricity needs would still require assessment. Changing the heating system does not remove the need for a workable electricity supply.
The start date is only part of the timetable
The government’s circular sets out transitional protection for qualifying projects. For non-higher-risk work, this generally requires the relevant building notice, initial notice or full-plans application before 24 March 2027, with work commenced as defined on the relevant building before 24 March 2028.
Developers therefore need their professional team to establish which rules apply to each building. Planning permission by itself does not settle that question, and a date in a construction programme is not evidence that the statutory commencement test has been met.
That assessment should happen before a tender is finalised or finance is agreed around a particular specification. Discovering that the design must change after the loan has been arranged can create extra costs and delay the start of work.
Turn a possible exemption into a costed comparison
A useful appraisal would compare the proposed compliant design with any alternative the project team considers capable of approval. Both need realistic connection costs, installation quotations and delivery dates.
The comparison should also capture professional fees, redesign work and borrowing costs during any delay. A cheaper heating installation may deliver little overall saving if obtaining approval or changing the contractor’s programme takes longer than expected.
While permission remains unresolved, the funding plan needs to show what happens if the alternative cannot proceed. Treating an anticipated saving as cash already available can leave the developer short when construction begins.
What this means for development finance
For a scheme already facing connection difficulties, the next step is to bring the infrastructure quotation, technical advice and revised programme into the same discussion as the borrowing.
A lender will need to understand how much money is required, when it will be drawn and when completed homes can be sold or refinanced. Changes to those assumptions may affect the developer’s equity contribution, interest allowance and repayment timetable.
Willow can review those financing implications with the developer and their advisers. The potential opportunity is specific: a confirmed alternative that improves a constrained project’s costs or timing could support a revised funding proposal. Until the route is established for the site, it remains an option to investigate.
Is a grid connection putting your development budget under pressure?
Willow can review the funding implications of your connection quotation, proposed heating design and build programme. Once the technical route is established, we can assess how changes to cost and timing affect suitable development finance.
Explore Development FinanceFrequently asked questions
Has the government abandoned low-carbon heating for new homes?
No. The standards remain directed towards low-carbon heating. The change concerns a limited route for individual exceptions, rather than a general return to gas heating.
Will a difficult grid connection automatically qualify a site?
No. A connection problem alone does not establish eligibility; the site needs an individual determination.
When do the Future Homes and Buildings Standards take effect?
The general commencement date in England is 24 March 2027, with relevant higher-risk building provisions following on 24 September 2027. Transitional arrangements can affect which requirements apply.
Can a developer budget for an exemption before receiving confirmation?
It would leave the appraisal dependent on an unresolved assumption. Compare the design options and their costs, then establish the applicable requirements before relying on savings in the funding plan.
How can Willow help a development facing grid constraints?
Willow can assess how connection costs, construction timing and the agreed design affect equity requirements and development borrowing. Your technical and building-control advisers establish whether the proposed heating arrangement is permissible.
About the author
Wesley Ranger is a director of Willow Private Finance. His work covers residential mortgages and specialist property finance, including complex income, higher-value borrowing and remortgages.