In the recent federal budget, it was announced that $1bn would be allocated to provide discounted loans to households to upgrade the energy efficiency of their homes and replace gas appliances with electric ones. A further $300m was provided for states to upgrade the energy efficiency of social housing.
This was intended to deliver on a promise the Albanese Labor government made in exchange for the Greens agreeing to caps on gas prices – in effect subsidising its cost below international prices.
According to the government, the package “will focus on households that most need support, such as low-income households [and] renters”. The federal government observed in its budget papers that “Australian homes are largely inefficient – Australia ranks 58 out of 63 countries on energy use per capita”.
The $300m allocated to upgrading energy efficiency for 60,000 social housing properties is very badly needed. State governments have not shown themselves to be particularly enlightened landlords. Their tenants are consigned to housing which the federal government notes has some of the worst levels of energy efficiency in Australia. But what about the remaining 380,000 social housing properties – more than 85% – that remain untouched?
In terms of the remaining $1bn to be allocated as loans, do we now expect renters to take out loans to upgrade their landlord’s properties?
One thing is for sure – very few landlords will take up these loans, because they don’t have to pay their tenant’s energy bills. Over many decades and across many countries, the universal experience is that landlords do not undertake energy efficiency upgrades unless they are required to by law.
Yet even in the case of those who own their own home, providing them with loans is just a small part of an effective solution to our poor standard of housing.
We already have government funding supporting loans for energy upgrades, and have for many years. The government’s Clean Energy Finance Corporation has been providing funding to a range of lending organisations that provide discounted finance to build or buy homes with high energy efficiency ratings or to finance energy-efficient equipment and solar systems. If these lenders were being overwhelmed with demand, then the Clean Energy Finance Corporation could easily give them more. That’s because the CEFC can draw down on around $4.5bn currently sitting in its account with the Treasury, so there’s serious question marks about whether an extra billion will make much difference.
Don’t get me wrong, provision of low-cost finance can be a useful tool in driving energy efficiency, but there are other policy tools, which receive a glancing reference in the budget, which are vastly more important. The issue though for politicians is that to use them effectively would require courage to take on entrenched interests in the real estate lobby and manufacturers who have failed to modernise their product offerings.
The first step is we must raise awareness among the community about just how poorly Australian housing performs. This requires prominent energy rating labels to be applied to advertisements whenever a home is put up for sale or lease. Few people appreciate that a large proportion of Australian homes probably rate around two stars or less out of a 10-point scale. At present, such ratings are being rolled out on a voluntary basis (except in the ACT). A small number of high-performing homes will seek out a rating, and the remaining, vast majority of homes that perform badly will get no rating.
Australian energy ministers agreed to roll out such a rating scheme on a mandatory basis back in 2004. But they then wilted under lobbying pressure from the real estate industry.
In addition, we need to implement minimum energy-efficiency standards for rental properties. The ACT government has made a great start by recently requiring minimum ceiling insulation levels. But ideally regulations should encourage upgrades to heaters and water heaters, and the adoption of solar and batteries if we really want to help reduce energy bills for renters. Other state governments, in particular Victoria, are considering implementing new standards. However, they will need to show some spine when they come up against the inevitable threats of a scare campaign from real estate agents.
The federal government could also help. Landlords receive very generous tax breaks for investing in property, which economists have pointed out over many years deliver little to no net economic benefit. The government has ruled out curtailing these tax breaks. But at the very least it could require that landlords’ properties meet a minimum standard of energy efficiency in return for receiving these tax breaks.
This is where a loan program becomes useful. If landlords claim they can’t afford to undertake upgrades, government can point them to their discounted loans, plus the fact the interest expense is tax deductible.
• Tristan Edis is a director with energy advisory firm Green Energy Markets
