Renters make up nearly a third of Australian households, yet many are missing out on energy upgrades – such as insulation, appliances and rooftop solar – that could slash their power bills and improve home comfort.
The problem, according to the Institute for Energy Economics and Financial Analysis (IEEFA), is landlords’ lack of motivation.
“The responsibility to do a lot of these household energy upgrades – to install insulation, to change out appliances like heaters and hot water systems – rests with the landlord,” the energy finance analyst Jay Gordon said.
“But because they don’t get the energy bill savings, there’s essentially no financial motivation for them to do it.”
This “split incentive” was the root cause behind the lower rates of insulation in rental properties, according to the IEEFA analysis. Separately, research from Energy Consumers Australia this week found the split incentive explained why 44% of owner-occupiers had solar compared with 11% of renters.
Sign up for the Breaking News Australia emailIEEFA modelled a range of energy efficiency measures across thousands of scenarios, and different types of households in every state and territory.
Gordon said that in the vast majority of cases a combination of efficiency upgrades, efficient appliances and rooftop solar halved energy bills, relative to a poorly performing home.
Collectively, the upgrades could save renters $20bn within a decade, and $107bn by 2050 – outweighing the capital costs.
But regulation was needed to solve the split-incentive problem, Gordon said.
Victoria has introduced minimum energy efficiency standards for rental properties to take effect from March next year.
The IEEFA report recommended a coordinated approach across all states and territories, including a standard requirement that gas or inefficient electric appliances be replaced with efficient electric alternatives when they broke down.
For non-appliance improvements – such as rooftop solar or home batteries – standards could provide landlords with flexibility to choose from a variety of upgrades including thermal efficiency improvements, rooftop solar and batteries.
Gordon added that future reforms could make eligibility for federal tax incentives, such as negative gearing, conditional on properties meeting minimum standards.
The independent energy consultant Tim Forcey said there were also steps tenants could take without involving their landlords.
Forcey, the author of My Efficient Electric Home Handbook, said in homes that already had reverse cycle air conditioning, people could start saving money immediately by using their split systems for heating instead of gas.
Switching out shower heads, draft-proofing and closing wall vents were all reversible steps that would also reduce energy costs, he said. “If you’ve got a shower head that’s using two or three times as much water as it needs to, that can be a big saving.”
Covering windows with bubble wrap worked a bit like double-glazing, he said, making things warmer while still letting light through. In summer, a perforated foil product could be fitted inside windows and skylights to keep homes cooler by reflecting the sun’s heat.
The benefits of upgrading rental properties would extend well beyond households, Gordon said, with the energy savings easing the strain on power networks during peak demand periods.
“In most regions, the upgrades delivered a net reduction in average-day peak electricity demand in summer and winter, even if some renters increased their electricity consumption following the upgrades,” he said.
“In regions like Victoria where gas appliances are widespread, upgrading rental properties would also deliver material gas savings, helping to free up gas supply for critical industries.”
