By Professor Ralph Horne, Director of the Centre for Design at RMIT

– FAVOURITES – 21 June 2009 – The bushfires in Victoria are tangible evidence of the sort of extreme weather events climate scientists have been predicting and they underline the need for significant action now to cut our greenhouse emissions.

Meanwhile, the economic downturn provides a golden opportunity to stimulate the economy intelligently – in other words, invest in the green technologies of the future rather than simply repeat the resource over-consumption mistakes of the past.

We have an immediate opportunity to make environmentally sustainable housing for the future – including through the rebuilding effort in fire ravaged areas.

Here I will concentrate on the thermal efficiency of housing, although there is also a strong case for cutting household energy and water use, through better appliances, household practices, consideration of embodied energy, and so on.

The question is, should we be talking 6 stars, or 7, or 8?  Or should we go straight for carbon neutral homes?

There are three key issues: standards, means and affordability.

Standards:

What is the appropriate level of performance?

A study for the federal government in 2005 benchmarked our 5-star performance level against typical local housing requirements in the USA, UK and Canada.

It found the average of all the overseas house designs performed at around 7-star standard.  Since then, there have been further improvements overseas.

Clearly, we should not be building at less than 7 stars anywhere in Australia if we want to meet basic housing efficiency standards.

Means:

The same study found house ratings were closely aligned to local building code stringency.  In other words, regulation works!

On this evidence, we need to immediately upgrade our national codes to at least 7-stars.

Affordability:

Cost is often cited as a reason to hold back on energy efficiency.  While peak housing industry organisations quote figures such as $10,000 to move basic houses from 5 to 7-star standard, actual calculations indicate otherwise.

In fact, the 7-star houses investigated for an unpublished study by RMIT’s Lifetime Affordable Housing project were found to be significantly more affordable than 5-star homes.

The study modelled the extra cost of a range of options from 5.5 to 7.4 stars, along with energy bill savings.  The assumed costs were based on the Garnaut Review’s 550 ppm CO2 projections, with savings discounted to the present.

In all scenarios, the net present value was positive, however, 6 stars was not as affordable as 7 stars. The best cost outcome was a 7.2-star standard, which provides a simple payback of seven years and an NPV of $3,500 over 25 years, with an internal rate of return of 18 per cent.

This simple calculation takes no account of the extra comfort experienced in better homes, the reduction in marginal load on the grid, nor the higher resale value of the house.

(Some estimates reckon each star returns around $9000 in extra resale value.)

It also takes no account of the fact that energy efficient 7-star homes require cheaper, smaller heating and cooling appliances than inefficient 5 and 6-star variants.

And with climate change, heat related ailments and hospital bills will be higher in homes with low energy efficiency ratings.

Stronger energy efficiency regulations for new housing means the price of materials such as insulation, high performance windows and seals comes down as the volume of supply goes up – and many of these materials then become standard retrofit products in renovations, providing further knock-on benefits for owners and occupiers of existing homes.

When it comes to implementation, the relationship between regulations and the development of capacities to implement them is complex and mutually dependent.

The Council of Australian Governments agenda of keeping compliance costs down by standardising building code requirements is laudable – provided the standards are right.  The worst thing we can do for affordability is not improve current building regulations standards.

However, a shift to 6-star standards is also wrong from a housing affordability perspective.

Moving immediately to 7 stars, as advocated by the Australian Conservation Foundation, would save around 30–50 per cent in greenhouse gas emissions on every new home across Australia.

We need a long term approach to move us towards carbon neutral housing regulation, starting with 7 stars as a minimum, right now.

Over the coming decades there is no reason to expect mortgage costs will go up, but every reason to expect energy costs will rise in real terms.

Australia needs clear signals regarding the shift to 8, 9 and 10-star standards over the next few years, to drive innovation, jobs and capacity in the new green economy.

Associate Professor Ralph Horne is Director of the Centre for Design at RMIT