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Support urgently needed for Storer’s bill to make rental housing bearable in extremes

Independent South Australian senator Tim Storer
Tim Storer

Supporters are scrambling to make sure a private members bill brought by South Australian senator Tim Storer this week, makes it all the way into law. If so, it just might make a difference to low income renters who currently freeze in winter and boil in summer. 


A private members bill tabled in the Senate this week by Independent South Australian senator Tim Storer is designed to remove the split incentive in the tax system that perversely stops property owners from making affordable housing bearable in extreme temperatures.

It proposes a tax offset of up to $2000 a year for energy efficiency activities by owners of properties that are rented out for $300 a week or less.

Currently upgrades for items such as solar PV and efficient heating and cooling, are considered an investment in the property and are not tax deductible as part of operational expenses. Instead they are treated as capital improvements that can only be deducted against the cost base for capital gains tax when the property is sold.

The bill would effectively enable upgrades to be treated as maintenance under the tax rules.

Senator Storer said the low rental threshold was chosen as it is inevitably lower income households living in these properties, and these are also often the worst homes in terms of performance.

The bill has two major aims, he said, reducing bills and improving comfort and health outcomes for low income people who rent, and demonstrating the benefits of energy efficiency to lay the groundwork for more ambitious policies.

Mr Storer said people who rent are acutely vulnerable to energy poverty. There are also at least 100,000 people a year disconnected from their energy supply.

“That is 273 people per day who simply do not have the means to pay their energy bills. That is 273 people per day forced to endure extreme cold and extreme heat, which, as we know, leads to grave health consequences.”

Energy poverty is now exacerbated by the fact that the rental housing market is no longer “a step on the way to owning a home, but increasingly a long-term, ongoing necessity for millions of Australians.”

Of the 30 per cent of Australian homes estimated to be rental properties, the majority are tenanted by low income households, he said.

Low income renters also tend to live in the homes most difficult to heat and cool and, because of their low income tend to buy the cheapest appliances that cost the most to run, “unnecessarily exacerbating energy poverty”.

The reality is they don’t have the means to upgrade their properties, even when the benefits might be substantial.

The problem is the current tax system “perversely incentivises landlords to retain energy inefficient rental properties,” Senator Storer said.

Rob Murray-Leach

Head of policy for the Energy Efficiency Council, Rob Murray-Leach agreed with the senator.

He told The Fifth Estate that the policy is not so much delivering an incentive to upgrade homes, but “taking away a perverse disincentive”.

Currently, only like-for-like appliance replacements are considered maintenance and therefore eligible for advanced depreciation.

Upgrades, such as installing solar PV or installing efficient heating and cooling, are considered an investment in the property and therefore not deductible.

The bill would effectively enable upgrades to be treated as maintenance under the tax rules.

He said that most energy efficiency issues with rental homes are “an indication of a deeper malaise in the system”.

The talk around energy efficiency needs to stop touting it as being mainly about reducing energy bills, and recognise the broader issues around health and safety.

People living in houses like tents, as cold inside as out

Research has shown a lot of low income households are living in houses that are like tents, he said.

For example, there are households in Tasmania where researchers have found the indoor temperature tracks the outdoor temperature. The houses are simply “impossible to heat,” Mr Murray-Leach said.

“There is not even any point in trying – and this is a health and safety issue.”

Another thing we know, he said, is that rental homes are “infinitely worse” in terms of their quality.

In the ACT, around 80 per cent of owner-occupied homes have insulation. Only around 40 per cent of rental homes do. And the ACT energy ratings disclosure rules are revealing that around 47 per cent of ACT rental homes have a rating of zero.

Senator Storer said that upgrading thermal building performance can prevent deaths and poor quality of life consequences.

“Current approaches to fixing the energy performance of our building stock focus on improving the standards of new buildings.

“Whilst commendable, we should not forget that only two per cent of Australia’s building stock is replaced each year, and many low income people rent old buildings. So, retrofitting is still critically important.”

What the bill says

The detail of the Treasury Laws Amendment (Improving the Energy Efficiency of Rental Properties) Bill 2018, viewed by The Fifth Estate, sets out the eligible activities landlords could claim the proposed tax offset against. They include upgrades to appliances, upgrades to the dwelling, installation of solar PV and energy efficiency audits.

Audits would be required to use a tool recognised by the National Home Energy Rating Scheme (NatHERS), NABERS or the CSIRO Liveability tool.

Get the building fabric right first, otherwise you could be wasting money – and energy

The proposal is for a three year trial, and in the first year, that the only eligible activity would be audits, not upgrades.

Senator Storer’s policy advisor, Samuel Murison, told The Fifth Estate that the thinking behind this was that dealing with the performance of the building fabric first will be most effective.

Otherwise, the likelihood is people will go straight into upgrading appliances, without first addressing the fundamental quality of the dwelling.

“If the building fabric is poor quality, then upgrading appliances has limited value [in terms of reducing energy use].

“It is an evidence-based policy,” Mr Murison said.

Property Council and others in favour of action

In developing the bill, Senator Storer’s team consulted with the Property Council, the Energy Efficiency Council, leading NGOs and consumer advocacy groups, he said.

The Property Council welcomed the bill’s first reading, describing it as good news in an “otherwise dark week for energy policy”.

Property Council chief executive Ken Morrison, said the bill is “an important step to address the split incentive that exists between landlords and tenants, where landlords make the investment in energy saving upgrades, but tenants experience the benefit through lower bills.”

Mr Morrison said he wants to see this as the start of a “broader conversation by our parliamentarians about the benefits of energy efficiency and the need for targeted policies to support greater action.”

A survey by the Property Council of Australia, the Australian Council of Social Service and the Energy Efficiency Council in April found that 84 per cent of voters support action to upgrade the homes of vulnerable households.

“In recent days we’ve seen the government step back from their commitment to deliver the National Energy Guarantee, a policy that would bring together energy and climate policy to deliver desperately needed certainty for investment by businesses and importantly, put downward pressure on energy bills for households who are struggling with historically high costs of living,” Mr Morrison said.

“Australia’s property industry is already leading the way on sustainability compared to global peers, but there is an important role for governments to show more leadership and establish more comprehensive policies targeting energy efficiency across the breadth of the nation’s building stock.”

The Bill has now been referred to the Senates Environment and Communications Legislation Committee for review. Senator Storer’s team said the committee is due to report on November 23. To become law, the bill will also need a second and third reading in the Senate and to pass a vote, before it proceeds to the Lower House for reading, debate and voting.

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Comments

3 Responses to “Support urgently needed for Storer’s bill to make rental housing bearable in extremes”

  • Chris Bennett says:

    Rather than increase tax incentives for already under taxed investors, there should be an energy rating applied to properties before they are allowed to be rented out. Same result, no cost to the tax payers.

  • Rav says:

    There is a smart way to deal with the energy crisis.
    There are simple solutions people can do themselves, it’s not rocket science, first don’t expect the government to help.
    There are no votes in it, or should I say donations.
    Start by looking where the heat is leaking out in winter. Make sure your not going to create a condensation risk, then select insulation not foil (reflective foil is not real insulation).
    Happy to do some blog posts, if my customers agree to providing pictures.

  • Paula Morrow says:

    I have just moved from 3 years living in a rented house that was the same temperature inside and out. I am now in a brick affordable rental unit and it is like heaven. Australia hasn’t taken nearly enough interest in passive design.

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