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If you’re a renter, it’s Mick Gentleman’s fault you were cold this winter

By Joel Dignam - 30 August 2017 9

Canberra renters have been left in the cold because they are being forced to pay too much to heat draughty and uninsulated homes.

If you are a Canberra renter, your home is probably too cold and you are probably paying too much to try to heat it. This isn’t an inevitable part of being a renter – it’s predictable problem that the ACT Government knows about and isn’t yet doing anything about.

It comes down to the fact that rental properties are more likely than other dwellings to be draughty and uninsulated. Draughts mean that more cold air comes in, and if you use a heater, more of that hot air goes out. The lack of insulation means that cold air gets into your rental home in every direction – through the ceiling, through the walls, and through the floors. Typically in winter, 40-60% of heat loss happens just through air leakage and through the ceiling.

Diagram showing typical heat loss in winter from an uninsulated home. Ceiling 25-35%, Walls 10-20%, Floor 10-20%, Air leaks 15-25%, Windows 11-20%.

Typical heat loss in winter from an un-insulated home. Uninsulated homes use about twice as much energy for heating. (Image source.)

It’s expensive and it’s unhealthy

Why is this a problem? Firstly, it’s expensive. Renters in inefficient homes end up having to spend more just to get the same level of comfort. And we’re talking serious dollars – depending on the household, we could be talking a couple of thousand dollars a year. That sucks even if you can afford it. If you can’t afford it – and one in two low-income people are renters – then it might mean not being able to use heating at all, or not being able to afford school books for your children.

Secondly, it’s unhealthy. Over one in twenty deaths in Australia are attributable to cold – that’s more than in Sweden, and it’s over ten times more deaths than are caused by heat. The World Health Organisation advises that the lowest healthy temperature for a home is 18°C. Four in ten rental households include dependent children – and in these inefficient properties, the health of these children is at risk.

Just fix it? Renters can’t and landlords won’t

Imagine though that you’re a cashed up renter willing to spend money to install insulation. Your first problem is that you’re not allowed to. Your tenancy agreement doesn’t let you make lasting changes to the property – even if they are hands-down improvements. But even if your landlord agrees, you have another problem – your lease is probably up in less than 12 months and you don’t know if you’ll still be living there. Insulation or draught-sealing would improve your comfort straight away and pay themselves off within years, but if you aren’t going to be living there, that isn’t much use.

As for the landlords? They don’t pay the power bills. Funnily enough, in Canada, many landlords do pay the power bills. And, funnily enough, they improve the energy efficiency. In Australia though, landlords won’t see the energy savings that come about from insulation or draught-proofing.

Many landlords want to do the right thing. But there’s bad news for them too. If an inefficient gas heater breaks down, a landlord might think about replacing it with a more efficient split system air conditioner. This could reduce the appliance’s energy consumption by as much as 90%. But while repairs are tax-deductible, ‘improvements’ aren’t – so the ATO is sending a big signal to landlords not to do anything but the bare minimum.

This is where the ACT Government needs to step in

The situation described above is known as a ‘split incentive’: where one person pays the cost, and the other person gets the benefit. It’s a well-recognised problem, with a well-recognised solution: government intervention.

There are three basic things that the ACT Government could do to start improving matters.

Firstly, they could require that by a certain year all rental properties meet minimum energy efficiency standards. Just like properties should have a lockable door and working hot water, they should have to have basic improvements to make them more affordable to keep at a healthy and comfortable temperature. If you’re lucky enough to afford an investment property, then you have a responsibility to reduce the risk that the inhabitants face energy poverty.

Secondly, the ACT Government could push for a change to the current tax laws, discussed above, that discourage energy efficiency improvements. This sits with the Federal Government but, the ACT Government has an opportunity through the COAG Energy Council to get it on the agenda. And while you can say what you like about the current government’s views on energy, surely we can agree they’d be happy to give landlords another tax deduction.

Or the ACT Government might decide that these first two measures are a bit too hard and complicated. Fine then – just make it so that landlords have to replace gas heaters with efficient reverse cycle air conditioners. AC may be a problem for peak demand in summer, but in general, it’s way more efficient than gas combustion heating. Typically, the energy savings would pay off the initial outlay within just two years.

So what now?

So the good news is that the ACT Government has already said they’d look into this. The current Parliamentary Agreement between the ALP and the Greens commits to “Undertake a regulatory impact statement into setting minimum EER standards for rental properties by the end of 2017, with a view to implementing measures to improve energy efficiency of rental properties”.

The bad news is that there’s no visible sign that they’re doing anything. The last Parliamentary Agreement said they’d look into requiring energy efficiency ratings for rental properties – and sadly, nothing came of that.

Mick Gentleman is the Minister for Planning and the ball is in his court. It’s going to be up to us to make sure they don’t run away from this one.

Is it worth it?

What we have at the moment is a big problem, a simple solution, and massive potential benefits. No renter should be forced to choose between heating their home and feeding their family. Yet that is the situation we are in today. And while many of us hate receiving the power bill, homeowners at least have the opportunity to improve the energy efficiency of their properties. Meanwhile, renters are being left out in the cold.

Simply making it so that rental properties have to meet basic energy efficiency standards would mean renters could have healthy, comfy homes. For those on low-incomes the money they would save would mean being able to afford school uniforms for the kids, or to be able to pay the internet bill on time. It would mean better health for a huge portion of the ACT population. It would mean less pollution, and less strain on our electricity infrastructure.

Frankly, it’s outrageous that this has been allowed to go on for so long. It just takes a Government willing to do what’s right – to step in, address a market failure, and make sure that renters can also live in comfy homes.

If you agree, you can join the Comfy Homes campaign by signing our petition at http://petition.comfyhomes.org/, or visit http://comfyhomes.org/ and follow us on Facebook.

Joel Dignam is the Chair of Comfy Homes. He is currently enduring his fifth winter in Canberra as a renter.

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9 Responses to
If you’re a renter, it’s Mick Gentleman’s fault you were cold this winter
gazket 8:39 pm 05 Sep 17

no insulation isn’t the reason we are cold this winter.
We are cold this winter due to the Labor/Greens destruction of our electricity grid and Labor stealing our own Australian domestic natural gas supplies to sell to foreigners at a lower cost than we can buy gas for . My gas has risen %230 since 2012 . Thats my oldest bill I could find,

Remember this for the next 10 years because prices will continue to increase . Pigs will fly before energy costs drop in price in Australia.

Malcom Turnball will want to finally get of his backside very shortly and do something meaningful about energy costs . ( not this make the clearer and you keep prices down now you hear bullcrap ) or he is out the door . He wont even win a raffle come election time.

The ACT gov don’t get off either as we are paying a fortune for a wind farm in SA and solar farms here which is also adding to our costs .

ALL the pollies are caring about is Gays and passports . Its a bloody joke all of them need a kick in the pants . They should hang their heads in shame because we are going backwards fast.

planeguy 6:36 pm 01 Sep 17

So a requirement to bring existing housing up to a minimum start rating is a difficult one. The EER assessment done on the last house we owned showed the house had a 0.5 rating, which we could have improved to 3.5 by spending close to 60k. Not sure what it would have cost to improve that further, but probably substantial. (about 7000 to hit 1.5)

So just to break even in interest (let alone opportunity cost) we would have to charge $3000 per year more rent, or $60pw.

That being said, I cant believe that rentals can be listed without an eer in the ad.

Maya123 5:19 pm 01 Sep 17

Joel Dignam wrote, “As for the landlords? They don’t pay the power bills. Funnily enough, in Canada, many landlords do pay the power bills. And, funnily enough, they improve the energy efficiency.”

I hope that never happens here. Some people are very wasteful and having someone else pay for their power usage would please them no end. Waste as much power as they like and it won’t matter as they are not paying. Great idea, not!

I used to share a house that was split in two, but there was still only one meter. So, while I was trying to conserve energy by switching off heaters, etc while I was out and only heating one room to a low temperature; the people in the other flat were leaving heaters and other electrical appliances on while out, because they couldn’t be bothered to switch it off, and I had to pay for their electricity. Same as in living in group houses, where one experiences the different energy consumption of different tenants, some who think it is their ‘right’ to leave their room heater on 24 hours all winter, so they can come home to a warm room, and having the other tenants, who are switching off heaters, etc pay for this in the shared bill.

Energy user pays is the fairest.

Maya123 11:33 am 01 Sep 17

Expectations have changed. Once a cold house was expected in winter. Often only one room was routinely heated. It is now that it is expected to be able to heat the whole house as a ‘right’ that cold rental properties are being mentioned. I have been a renter and owner. All houses were cold. We coped. Only the lounge room was heated. Expecting to heat the WHOLE house is a new expectation. Sure encourage owners to improve their house, but I don’t force them. Not all owners have heaps of spare cash. Besides, it’s very difficult to retrofit a house to the efficiencies of a new build designed and built correctly. It’s more than insulation. Replacing much of this housing stock would be a better option. I’m not suggesting that adding insulation won’t help though in the short term.

It’s easier to build properly in the first place. A better solution would be to increase the standards new houses are built to initially. Modern housing could still be built better. If a house ‘needs’ any air-conditioning, or much heating (and any heating at all during a sunny day), it hasn’t been designed and build as well as it could be. And seeing some new housing, I wonder how they could possibly pass to be allowed to be build. The standards still appear low. Forty years ago I belonged to a group who were lobbying to get houses built to a higher standard, but we were ignored. Imagine how many new houses, which could have been build so they needed no air-conditioning and virtually no heating, have been built during that time. All of Gungahlin, much of Tuggeranong, etc. Plus knock down, rebuilds. Large areas of Canberra. Most houses are still not being built to high enough standards.

Holden Caulfield 9:33 am 01 Sep 17

After reading the opening paragraph: “If you are a Canberra renter, your home is probably too cold and you are probably paying too much to try to heat it. This isn’t an inevitable part of being a renter – it’s predictable problem that the ACT Government knows about and isn’t yet doing anything about.”

I felt it was worth responding. That opening, was laying it on a bit thick, I thought.

I understand my circumstances may be the exception, on a few fronts, but I rent an apartment that is not only very well built, but also very well insulated. I reckon I’d be lucky if I’ve turned my heater on half a dozen times this winter just gone.

Advocating for renters in less fortunate circumstances is definitely worthwhile, but let’s not pretend all rental properties are energy inefficient or that all landlord exploit their tenants. Like most things, there’s good and bad on all sides.

devils_advocate 9:27 am 01 Sep 17

gbates said :

tim_c said :

Or we could just let the free market sort it out

High prices and poor quality is the free market’s response to the land supply restrictions imposed by a government desperate to maximise land sale revenue regardless of the consequences. Since they already interfere to make things worse for people, maybe they should interfere once in a while to make things better. I wouldn’t hold my breath though.

Nope. The problem is the ACT Government actively prevents people from renewing the housing stock.
The article itself acknowledges that new houses are required to meet energy efficiency targets. What the article is implicitly complaining about is older style houses, with joisted floors, brick veneer and single glazed windows. Somewhat inconveniently, these houses are all in the places people want to live. It is always open to people to go rent a place in Gungahlin, Weston or Tuggeranong, where the housing stock is newer and energy efficiency ratings are higher. But they choose not to.

Secondly, two wrongs don’t make a right. All the government interventions in the rental market that ‘make things worse’ often end up increasing the cost to landlords. If, as you concede in your post, restrictions in the market give landlords market power, then what do you suppose will happen when the landlord’s cost base increases? They will pass that on to the renter, because they are able to.

In summary, the ‘split incentive’ argument only becomes relevant because a) landlords have power in the market due to supply restriction and b) any rational investor seeks to recover their costs plus a return on investment.

tim_c 9:27 am 01 Sep 17

gbates said :

tim_c said :

Or we could just let the free market sort it out

High prices and poor quality is the free market’s response to the land supply restrictions imposed by a government desperate to maximise land sale revenue regardless of the consequences. Since they already interfere to make things worse for people, maybe they should interfere once in a while to make things better. I wouldn’t hold my breath though.

So you’re saying the problem is caused by government intervention, and should be fixed by more of the same thing that caused the problem in the first place? That sounds a bit like a drunk trying to drink themselves sober.

gbates 10:05 pm 31 Aug 17

tim_c said :

Or we could just let the free market sort it out

High prices and poor quality is the free market’s response to the land supply restrictions imposed by a government desperate to maximise land sale revenue regardless of the consequences. Since they already interfere to make things worse for people, maybe they should interfere once in a while to make things better. I wouldn’t hold my breath though.

tim_c 4:41 pm 31 Aug 17

Or we could just let the free market sort it out – if these properties were really that bad, people wouldn’t rent them, or they’d demand cheaper rents to compensate.
The suggested government intervention will result in higher rental rates:
* Either landlords will be forced to sell older properties that will cost too much to rectify (ie. more than the expected returns) resulting in reduced number of properties available for rent and increased rent as the same number of renters compete for a diminished number of homes.
* Or landlords will have to recover costs of upgrades through increased rental rates.

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