> Main problem is that it wouldn't work with buildings designed for higher heating temperature so it is limited to new builds.
That's no longer the case with modern, multi-stage high temperature heat pumps [1]. These consume more electricity, yes, but still achieve far better efficiency than straight burning fuel or resistive heaters.
I guess technically you could put heat pump at destination but that significantly eats into "free heat" part
And that is why existing installations put the heat pump to production side and then just pipe the high temperature water to district heating network.