I've argued that the #development sector has a disproportionate burden in meeting efficiency targets with energy ratings for new homes. New dwellings must be "7-star" – compared with established homes which do not need to be updated to any particular standard, unless substantially renovated.
So, it was interesting to see the Victorian Government announce new, proposed increased minimum energy efficiency standards for rental homes which will mostly impact older dwellings.
Minimum standards which would take effect in 2025 include: ✅Ceiling Insulation: Mandating R5 insulation in properties with none ✅Draught Sealing: Sealing external doors, wall vents, and gaps ✅Hot Water Systems: Electric, low running cost systems (no more gas) ✅Shower Heads: 4 Star WELS rating ✅Heating and Cooling: 2 Star heating, 3 Star cooling standards
While these changes have merit, we should not pretend they come at no upfront cost – 💰cash which many smaller landlords may not have or want to spend.
That these upgrades might pay for themselves in energy savings the longer term is separate to whether owners can bear the price now. The Regulatory Impact Statement does a cost-benefit (with several flaws) which does not state how that benefit is expected to be shared – i.e. will tenants truly "contribute' part of the cost savings through higher rents?
🛑Already, the combined impact of current tenancy rules, heightened land taxes, and higher interest costs, are seeing landlords exit Victoria faster than anywhere else in the country. These extra changes could well be the straw for the proverbial camel's back for another round of landlords to exit the state. 🛑
🏠This might get more people into home ownership in the short term, but since we are not creating enough new dwellings to replace them, this can only lead to a reduced rental housing pool, spiking rents and hurting renters.
🏢Interestingly, these measures could push more renters into a #BTR style product which will comprise newer, more efficient buildings.
Is now the right time to make these changes in Victoria? Has the need for environmental advancement been balanced appropriately with the economic realities for rental providers?