Building energy regulation: red tape or green bounty?

Australian housing for decades has had very low national standards for energy efficiency. Despite this, housing industry lobby groups have consistently argued that any changes will lead to little benefit and excessive costs – that they are simply red tape that impacts negatively on housing affordability.

With more than a decade since the introduction of the 5 Star Standard for residential energy efficiency in Victoria, it’s timely to reflect upon the extent to which the standard is delivering its intended policy objectives, and whether consumers are realising the benefits of better-designed buildings.

The State of Victoria led the nation by introducing housing insulation regulations in 1991. Raising the regulatory stringency bar from a notional three star NatHERS base level to five stars a decade later as part of the Victorian Greenhouse Strategy would not have been seen as a radical policy initiative at the time.

Nevertheless, the housing industry objected vehemently. One senior industry executive was quoted as saying “it could cost up to $10,000 per house to implement, which could cut out a significant section of the population from home ownership” and even that “builders may stand as candidates in the next State Government election to campaign against increasing regulations and costs for new homes”.

As part of my research for the Cooperative Research Centre for Low Carbon Living, I recently undertook an analysis of the 5 Star Standard to see whether it has measured up as a policy instrument for greenhouse abatement, and if industry concerns about impacts to housing affordability and damage to the state’s housing market have been borne out.

The analysis used current building industry statistics to assess the impacts of the standard on Victorian residential greenhouse emissions and on housing market performance. The trajectory of compliance costs was tracked on the basis of a series of relevant studies published over the last decade.

Results were very encouraging, both in relation to the standard’s effectiveness and the consequent potential for regulatory reforms to building energy standards in the National Construction Code.

It was apparent that principles of regulatory best practice had been followed in practice, and that policy outcomes exceeded original targets for greenhouse abatement. Compliance costs in terms of upgraded building design and construction not only fell below original government estimates, but also progressively diminished over time as anticipated industry learning processes kicked in.

Concerns about negative impacts on housing affordability were therefore not substantiated, and there was no evidence of negative impacts on Victoria’s housing market.

Of course that’s the good news. The bad news in relation to implementation of national energy efficiency provisions in the Building Code of Australia came out of recent analytical work on residential energy efficiency standards by the CSIRO and by consultant Pitt & Sherry for the National Energy Efficient Building Project.

These studies identified major shortcomings in the design and construction of new Australian homes, meaning that compliance with NCC energy efficiency provisions is being widely flouted, compromising government policy objectives and failing to deliver on consumer expectations when it comes to comfortable, cost-effective, energy-efficient homes.

Earlier research by the Victorian Building Commission (now Victorian Building Authority) discovered that, while the average rating of new homes actually exceeded the five-star minimum by a clear margin at building permit stage, design responses to the NCC’s performance-based requirements were sub-optimal. Building designs were brought into compliance through the shortcut of re-specifying existing designs rather than actually re-designing homes to take advantage of the performance-based NCC.

So in practice consumers are not getting sufficient value for money at the design stage, and the onus is now on state and territory building administrators to correct systemic flaws in the national building control regime. How effectively this issue is actually being addressed remains an open question.

Still, the overriding message is clear: building energy efficiency standards are potentially a very effective instrument for delivering on triple-bottom-line policy objectives – economic, environmental and social.

Of course, to fully realise their potential they must be supported by an effective enforcement regime coupled with well-resourced industry capacity-building and comprehensive cultural change processes. Fear campaigns by housing industry lobby groups have been just that.

The Australian public deserves better housing energy efficiency.

Robert Enker is a PhD researcher with the Cooperative Research Centre for Low Carbon Living and Curtin University Sustainability Policy Institute.