Energy equity in rental housing – time for change, including in the tax system
Willow Aliento | 7 August 2018
Independent South Australian Senator Tim Storer has flagged a new bill to make changes to the tax system to remove split incentives that cause property owners to avoid bringing rental housing up to scratch on energy efficiency. The cost to tenants could be $2800 a year in unnecessary heating costs – and if they can’t afford it they face danger to their health and safety, especially if they are elderly or vulnerable.
ACT-based advocacy organisation Better Renting last month released a report that showed the poor performance of Canberra rental housing is costing renters $39 million annually in added energy costs.
“Frozen out: The Burden of Energy Deficiency on People who Rent” found that a three-bedroom home with an energy efficiency rating (EER) of zero would cost renters an extra $2800 a year to be as warm as a home with a rating of five.
Better Renting director Joel Dignam says that for some renters, the cost of energy deficiency is monetary but others, especially older renters or people with disabilities, are paying with their physical and mental health.
Others groups agree – energy efficiency and thermal performance are not only financial issues for many residential tenants, they are also a health and safety issue.
Groups such as Environment Victoria have flagged the need to take action now to address the standard of rental dwellings.
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“Much of Victoria’s rental housing stock is not able to provide safe and affordable shelter, particularly with more than half of private rentals taken up by low-income or disadvantaged people,” EV efficiency campaigner Anne Martinelli says.
According to Carol Croce, project officer for peak body Australian Affordable Housing Industry, one of the positives of the National Rental Affordability Scheme (NRAS) was that it had quite stringent environmental standards requirements.
For the majority of non-community housing developers, it was also important to deliver a quality product that would be in a good position to be on-sold to the private market at the end of the subsidy period.
Community housing provider Compass is one of the supporters of the Everybody’s Home campaign.
A spokesman for Compass told The Fifth Estate one of the goals of the campaign is to get a better deal for renters, including getting tenancy laws updated to include minimum property standards.
However, in applying minimum energy efficiency standards to older properties it would be important to have the standards set through a process of consultation, and phased in over a period of time to make sure they are achievable, he says.
This might also help avoid unintended consequences like increasing the number of properties withdrawn from the rental market and put up for sale, or put to an alternative use like short-term letting such as AirBnB where the normal residential tenancy laws don’t necessarily apply.
In the ACT, tenants are also getting noisy about the poor state of rental housing when it comes to energy efficiency.
Better Renting director Joel Dignam says the ACT currently has mandatory efficiency ratings when residential properties are sold, however, they are still virtually optional for residential dwellings. Specifically, they are mandatory to disclose when seeking tenants if the property has a rating – but obtaining one is not mandatory.
He recently told The Canberra Times, that some have described this as making the ratings “de facto voluntary”.
Surveys also show that eight in 10 rentals in lower socio-economic areas of the ACT do not disclose a rating, and in more prosperous suburbs, only seven in 10 do.
Susan Helyar, director of the ACT Council of Social Service (ACTCOSS) and spokesperson for the ACT Energy Consumer Policy Consortium says the research “backs what tenant advocacy, environmental, and business organisations have long been calling for: all privately-rented housing in the ACT must have a minimum energy-efficiency rating of five stars.”
“This can be balanced by funding for landlords to make energy efficiency upgrades.”
It could also form part of the ACT Climate Change Mitigation Adaptation Strategy, she says.
The tax system stands in the way… could be improved
One of the barriers landlords face aside from the split incentive when it comes to improving rental properties is the tax system, according to Independent South Australian Senator Tim Storer. So he’s aiming to fix that, flagging a private members bill that he wants to introduce into the Senate on 16 August.
A spokesman for Senator Storer told The Fifth Estate the legislation is designed to remove the current disincentive that arises because the tax system treats renovation differently to regular repairs and maintenance.
The latter is deductible, but renovations that would improve a home’s performance may not be.
There are “significant questions” over installing insulation, for example, whether it would be considered a renovation and therefore not deductible.
Replacing a stove would be considered deductible maintenance – but replacing the kitchen would not.
The spokesman says the benefits of changing the rules to facilitate upgrades would potentially lead to not just lower energy bills for renters, but also lower costs to the community in terms of reduced health costs incurred from living in poor quality housing.
The bill is also an opportunity to give exposure to the problem, he says.