Victoria’s new tenancy reforms have passed both houses of Parliament and sustainability advocates say this has established the pathway for better energy standards for rental properties, potentially through mandatory disclosure of standards.
Chief executive officer of Environment Victoria Mark Wakeham said the amendments to the Residential Tenancies Act set renters on a path to safer, warmer houses.
“There is now no impediment for the next Victorian government to introduce new energy efficiency standards to lower energy bills and cut climate pollution, ” he said.
The legislation requires landlords to ensure properties meet appropriate standards. While it does not specify a performance benchmark in the legislation, the rules create the necessary “head of power” for mandatory standards to be implemented.
Mr Wakeham said setting minimum standards is the “single most effective action governments can take to both cut renters’ cost of living and cut climate pollution.”
“Renters are demanding new standards to guarantee their homes have basic energy efficiency measures like insulation,” he said.
The One Million Homes Alliance, which includes EV, Victorian Council of Social Services, Tenants Victoria, the Brotherhood of St Laurence, Consumer Action Law Centre, Moreland Energy Council, Uniting, Yarra Energy Foundation, the Alternative Technology Association and the Northern Alliance for Greenhouse Action has “campaigned hard” for these laws, Mr Wakeham said.
“With home ownership increasingly out of reach for many low- and middle-income Victorians rental houses must meet basic standards.
“We now expect that whoever wins the November election will set energy efficiency standards that protect tenants from rising power bills and give landlords a clear incentive to invest in energy saving measures.”
Along with the need for legislation that makes introducing minimum standards legally possible, energy efficiency consultants told The Fifth Estate there was also a need for an objective, credible and effective way of assessing the performance of existing dwellings.
It is believed the Victorian Government’s Residential Energy Efficiency Scorecard could be the tool the market needed.
The government has been piloting the REES through various initiatives including assessments of social housing and projects targeting low-income homes in conjunction with organisations including the Moreland Energy Foundation.
The South Australian government has also been trialling the tool, with the state’s own mandatory retailer energy efficiency program, the Residential Energy Efficiency Scheme, allowing assessments to be carried out, consultants trained and accredited to the Victorian scorecard’s standards.
It is understood the ACT has also been piloting the scorecard.
The government’s aim has been to see the scorecard gain traction nationally. Consultants Point Advisory were commissioned to produce a report on the commercialisation potential for the scorecard, and the strategies required to see it gather market momentum.
The consultants said the rate of uptake of the scorecard would vary significantly if was mandatory instead of voluntary. (Mandatory disclosure of performance standards for energy through a NABERS rating is widely credited as transforming the commercial property sector for offices of more than 2000 square metres or, and more recently those of 1000 sq m or more.)
The consultants identified five potential market segments that could make good use of an optional tool:
- Property owners wanting to identify and prioritise upgrades.
- Vulnerable households in social housing could be targeted through public and community housing landlords using the scorecard to determine the most beneficial and cost-effective upgrade works for properties and whole portfolios.
- Builders could use the scorecard as a differentiator for new properties to “demonstrate excellent performance of display homes and thus attract buyers concerned about future energy bills”.
- Energy retailers’ hardship customers
- Property owners looking to undertake minor upgrades
These segments offered the best chance of adoption, the consultants said, but also pointed out that these “remain niche markets that are unlikely to lead to a wide-ranging market transition without significant and ongoing effort.”
Mandatory disclosure was the single most effective measure the report identified for rapidly growing uptake of the tool and delivering successful nation-wide commercialisation.
Alan Pears on why mandatory is so much better
RMIT energy efficiency expert Alan Pears told The Fifth Estate that “experience shows that if you have a voluntary labelling scheme only those who think they will benefit use them.
“Owners who have good performers stand to benefit.”
The report suggested the cost of assessments would be around $320 to $350 plus the lead generation costs involved for the consultants providing assessments.
Some of the stakeholders consulted for the report said a mandatory rating scenario could compromise housing affordability for buyers and add to rental costs.
The additional “red tape” could also be a regulatory burden.
Mr Pears said one always “has to ask who it is that is objecting, and what their agendas might be.”
He suggested that access to low-interest loans for rental property owners through an Energy Upgrade Agreement mechanism could “take the edge off opposition at a time when many landlords are losing access to interest only loans, so may be under a bit of pressure.”
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The government could also subsidise assessments for low income people, he said.
The likely cost of an assessment equates to $1 a day over one year, plus administration costs, which “should be small if the agent is organised.”
Mr Pears said economies of scale should also cut that cost significantly, especially where local assessors are used, which would cut travel time.
Potentially, allowing a rating up to three years old to meet any disclosure requirements would also enable to property owner to spread the cost over more tenants or time, he said. If a tenant left before three years, the government could also deliver a partial rebate for the remaining period of validity.
Another way Mr Pears suggested to cut assessment costs would be to give assessors better training around details such as estimating windows, as measuring up appears to be an activity that uses a substantial amount of an assessor’s time.
On the mandatory issue, Mr Pears said that “in principle, potential buyers or renters should know the likely energy costs of the property”.
“REES is the best tool at present, as far as I know. It covers building and major fixed equipment and appliances [and] also highlights summer performance.”
He said it would be possible to phase the scorecard in over time, for example, initially targeting welfare recipients who are renting, as the government subsidises their energy bills already, giving a basis for providing assessments for free or at a discount.
Assessments and disclosure at point of sale would also be an effective first step, as the cost would “likely be spread over a longer period of time.”
“So it’s not ‘all or nothing’ and there is substantial scope to reduce the cost.”
Point Advisory noted that “the greenhouse gas reduction outcomes expected from broad use of the scorecard and subsequent investments in energy efficiency upgrades, as well as the information on the housing stock it may generate over time, can be considered public goods”
“In the absence of any other obvious champion, it falls to government to play this role.”