What about the renters?

More than a third of Australians live in rental accommodation – that’s about three million rental households.

Along with those on low incomes, renters are at greater risk than homeowners of not being able to share the benefits of getting off gas and going all-electric. Hardly any rental properties have solar panels.

“People on low incomes are more likely to be renters and to spend more of their income on utility costs,” says Joel Dignam from Better Renting.

“The combination of inefficient housing and rising power costs makes it harder for people to heat their homes, endangering their health.”

Whilst they can try to find a better energy deal, renters have limited ability to improve their situation. They can’t replace major appliances, improve the building’s thermal efficiency, or put solar panels on the roof.

Renters rely on the goodwill of landlords to help them pursue more efficient and healthy living conditions, but owners who don't live in their properties have little financial incentive to make them energy-efficient.

“It's a massive issue that absolutely has to be solved,” says Francis Vierboom, from Rewiring Australia.

In a recent study for the Brotherhood of St Lawrence, Sangeetha Chandrashekeran and Julia de Bruyn found that many renters with poor housing conditions are reluctant to ask their landlords to improve the energy efficiency of their properties, or change the appliances, because they fear this might lead to a rent increase, or eviction.

Their research shows that renters also cannot prioritise electrification even if they want to.

“Electrification was perceived as risky by some respondents because the costs can be considerable and the changes present unknowns, for example regarding an appliance’s quality, longevity, reliability or pay back time, or the trustworthiness of the installer or installation,” write Chandrashekeran and de Bruyn.

“This sense of risk is magnified for lower-income house holds, who lack savings to cover unexpected events.”

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Minimum Energy Standards

In 2019 the COAG Energy Council agreed to establish a national framework for minimum energy efficiency requirements for rental properties throughout Australia.

Work is underway to develop the framework, but not all state and territory governments have committed to acting and implementing standards in their own jurisdictions. 

Most states of Australia have minimum standards for rental homes, but these standards are general in nature, and in NSW, Queensland, Tasmania, SouthAustralia, the Northern Territory and Western Australia there are no references to energy efficiency.

Since March this year, new rental properties in Victoria must have a fixed heater that meets energy efficiency standards.

"We've heard from renters in Victoria who tell us they've been able to get warm for the first time," says Joel Dignam from Better Renting, "and that more efficient heaters have also contributed to lower power bills."

However, Dignam says these requirements need to be enforced.

"If the government doesn't enforce its regulations, property managers will learn that they can ignore them," says Dignam. "We routinely see or hear about properties advertised in Victoria that don't meet minimum standards, or renters telling us about landlords who got a quote but then never did anything more."

A major problem with the Victorian requirements for heaters in rental properties are the energy efficiency requirements are too low.

The standards only stipulate a 2-star rating for air conditioners or heat pumps, and they allow inefficient 2-star gas heaters, open fires, and ducted heating using any type of fuel.

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Independent energy researcher and consultant, and founder of the My Efficient Electric Home, Tim Forcey says these minimum ‘efficiency standards’ are far from efficient.

“They should only be promoting reverse cycle air conditioners – heat pumps,” says Forcey. “Anything that isn't air-conditioning is very inefficient as well as being stupid and even unhealthy or even deadly.”

“There is plenty of new information about the health impacts of people breathing wood smoke,” says Forcey. “It’s like living with a smoker.”

“Wood heating is dumb and no wood heater is efficient. The best wood heaters are only getting about 5% of the energy out of the wood into the house and the rest is just chuffing off into the chimney.”

Forcey has recently completed an energy assessment on the home of the Victorian Minister for Energy, Lily D’Ambrosio, who is in the process of getting her own home off gas, and is well aware of the problems with gas.

“Anything promoting gas is dumb and stupid. It’s a lot more costly than running a heat pump and you also have to have [a heater] checked every couple of years to ensure it’s not putting out carbon monoxide.”

Whilst the Victorian Council of Social Services say the introduction of some energy efficiency standards was a win for renters, they would like to see the standards strengthened.

"The government is still consulting on improvements to cooling, insulation and water heating standards," says VCOSS CEO Emma King. "We are optimistic the government will strike the right balance."

Solar for Rentals

Whilst the Victorian government may not have set efficient energy standards for heaters in rental properties, they have made an effort to get more solar panels on the roofs of rental properties.

“Victoria is the only Australian state or territory that supports renters and landlords to install solar," says Stan Krpan, Solar Victoria CEO.

Their Solar for Rentals program enables landlords to claim up to $1,400 as a rebate on the cost of installing a solar system and to receive a matching interest-free loan.

Whilst landlords are responsible for applying and paying for the system, renters can make a co-contribution to the monthly loan repayments.

Just under 5000 solar rebates have been approved through the Solar Homes Program’s Solar for Rentals stream since it began in 2019

However, the Brotherhood of St Lawrence researchers found that there was a low uptake of the co-contribution part of the program by renters because of the difficulties they have in making a co-contribution.

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The ACT

The ACT is the only jurisdiction where it is mandatory to disclose the energy efficiency star rating of a property before a renter moves in. They also require all homes being sold in the ACT to carry a star rating.

In April this year the ACT also introduced a regulation which requires all residential rental properties in the ACT to meet a new minimum energy efficiency standard for ceiling insulation.

Improving the thermal efficiency of a building is regarded as an important step in the electrification process.

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“With our quite cold winters and pretty hot summers, so many of our tenants live in homes that are poorly insulated,” Shane Rattenbury, ACT Minister for Energy, told the SwitchedOn podcast.

“They're freezing cold in winter, they're way too hot in summer, they have high energy bills, and they're just not comfortable to live in.”

Rattenbury calls this “a classic market failure” of the rental market.

“People often talk about that split incentive – the idea that the landlord has to pay for the installation, and the tenant gets the benefit. And that is a problem that no one's worked out how to solve.”

Rattenbury believes governments must step in and regulate the situation.

He told the SwitchedOn Australia podcast that government intervention may be needed to ensure other energy efficiency standards are reached in rental properties in the ACT.

“That is the approach we will need to take down the line with gas as well.”

Instant asset write-offs

In their Getting off Gas; why and who should pay report the Grattan Institute argues that the simplest way to encourage private landlords to move to all-electric appliances is to provide a financial incentive in the form of an instant asset write off for new electric appliances that replace gas ones.

“An instant asset write-off allows a landlord to claim a tax deduction for the full cost of a new appliance, rather than claiming a proportion of the cost each year over its lifetime as it depreciates,” the report states.

Grattan Institute modelling shows that an instant asset write-off for heat pump water heaters and induction stoves will close the cost gap between these appliances and their gas alternatives.

For the tax office this would be a simple case of changing the life years of heat pump water heaters and induction cook-tops from 12 years to zero years in their depreciation schedule.

Depending on the landlord’s taxable income, an instant asset write-off would meet between 23 and 55 per cent of the cost gap for water heaters, and 39 per cent to 93 per cent of the cost gap for cook-tops.

The Brotherhood of Lawrence report which surveyed low-income households, half of which were renters, found support was strongest for subsidies to lower energy costs, and grants to improve energy efficiency. Renters specifically wanted landlords to upgrade the appliances of their properties.

Carrots or sticks?

In addition to providing incentives or subsidies for landlords, Joel Dignam from Better Renting believes landlords should have a legal duty to provide homes with a minimum standard and there should be enforcement mechanisms to ensure they do.

“Minimum standards would reduce the opportunities for landlords to extract increased rent from tenants,’ says Dignam.

“While energy efficiency features do attract a rent premium, this is because such features are rare and have scarcity value.”

Dignam believes that if energy efficiency features like ceiling insulation and efficient electric appliances were more ubiquitous, “they could not attract a premium.”

Chandrashekeran and de Bruyn also want to see strong minimum energy efficiency standards implemented for rental homes and appliances but recommend measures need to be put in place to ensure the standards do not translate into higher rents, and renters security of tenure are protected.

An investment

Jon Jutsen, the CEO of RACE for 2030, who has recently fully electrified his own home, says that anyone who owns a home needs to see that investing in efficient electrification will pay off because efficiency upgrades will eventually become significant assets for homes within 5 to 10 years.

Jutsen says investing in efficient electrical appliances will increase a property’s value, and make it more attractive to future renters, or buyers, who will be able to reduce their energy bills.

People will not want to live in a home “that has a high carbon footprint and obviously associated with that, high energy costs.”