Australia’s rental housing is a national disgrace – and improving it will combat the energy crisis
Australian households and businesses are facing energy price rises that dwarf anything this country has seen before.
Due to a Russian withdrawal of supply, Europe is scrambling to get its hands on enough gas to get through its forthcoming winter. This has flowed through to an astronomical climb in the wholesale price of gas in Australia: 400% over 12 months.
In addition, because coal can be substituted for gas, its international price has also risen by around the same proportion. This has also flowed through to Australian wholesale contract electricity prices, which are up by about 300% on where they were 12 months ago.
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State and federal energy ministers recently vowed to “consider all options to take strong actionto bring down power prices”.
The federal government is hinting this will involve imposing price controls on gas producers. While our European and north Asian gas customers will be aggrieved, they’ll probably understand.
This will help reduce the pain, particularly on manufacturers. But there are constraints on how far these controls can go. They will still leave us with expensive gas – likely to be more than double its long-term historical levels. In addition, this will still leave us with extremely expensive electricity, because a large part of the increase in electricity prices is due to very high coal prices.
Ministers must realise that you can lower people’s bills not just by influencing price, but also helping reduce householders’ need for energy by enhancing energy efficiency.
The standard of Australian rental housing is nothing short of a national disgrace.
It commonly snows over winter time in Britain and the Netherlands. So why do they need less gas to heat their homes than houses in Victoria? And why do a larger proportion of people in Australia die of cold than in Sweden?
This is serious health issue as well as one of economics.
While the vast majority of owneroccupied housing in Australia is insulated, much rental housing lacks even basic levels of ceiling insulation.
Across Australia many rental properties lack any kind of heater, and so must rely on energy-guzzling plug-in heaters that struggle to heat a home. The Victorian government is the only one that has moved to regulate in this area by requiring that rental properties must install an “energy-efficient” heater. So what did this mean? A gas appliance with an energy rating of two stars out of six. You’d struggle to even find a gas heater with a worse rating than that to purchase.
About 30% of all Australian households have solar power, yet within rental properties it is closer to 5%.
The most vulnerable members of our community, the ones for whom an energy bill represents a major expense, are likely to rent their homes. They don’t have any say on the heater, the insulation, the water heater, or installation of a solar system –which are
the main determinants of home energy consumption requirements. That’s the landlord’s decision.
The cold-hearted reality here is that the landlord doesn’t pay the energy bill and so in most cases isn’t worried about these features.
A house with good ceiling insulation, draught-proofing, an energy-efficient reverse cycle air conditioner, and a solar system or energy-efficient water heater is likely to have an energy bill $800 to $1,200 less than a similar house without these features. These bill savings completely dwarf anything that might be provided through gas price controls.
Property investors for the most part have done extremely well over the past five years. Capital gains of $100,000 or more would not be uncommon in many Australian cities. Is it unreasonable to insist that they undertake upgrades costing around $10,000, to ensure their tenants can afford to heat their home and have warm water?
To remove the financial sting to landlords, the federal government can provide concessional finance through the Clean Energy Finance Corporation.
But providing a home that is healthy and affordable to live in should not be optional. This was always a problem, but it has become incredibly more pressing given the energy price rises we are now witnessing.
• Tristan Edis is a director with energy advisory firm Green Energy Markets