28 March 2023

Own or rent an ACT investment property? Here's how impending ceiling insulation regulations impact you

| Dione David
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Manager of Civium Residential Property Management Danielle Gavin. Photo: Liv Cameron.

The 1 April deadline approaches for a new regulation under the Residential Tenancies Act 1997. It requires all rental properties in the ACT to meet a new minimum energy efficiency standard for ceiling insulation.

The phase-in period extends to 30 November 2026, but the first milestone in April means owners need to indicate the ceiling insulation status of their investments.

Manager of Civium Residential Property Management Danielle Gavin said for a contingent of investors, it would be a relatively straight-forward exercise.

“We’re having conversations with our owners at the moment and the first thing we’re asking is whether their property was built after 1997,” she said.

“If built after 1997, the Australian Building Code of the time stated they had to have R2 bats or above installed in their ceilings.

“As long as these properties haven’t undergone any major renovations since, they should already comply. And all that will be required is a copy of the EER (Energy Efficiency Rating) statement or a statutory declaration indicating the type of insulation used.

“We will keep these on file in case owners are audited.”

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Properties built before 1997 will require investigation. If found to not meet the minimum standards, owners will need to install R5 insulation bats.

Those owners will have nine months from the start of a new tenancy agreement to get their property up to code.

However the end date of 30 November 2026 applies for all properties to meet this code, regardless of existing tenancy agreements.

Ms Gavin said properties that required an upgrade to R5 bats would have to first undergo an electrical compliance check to ensure it also met the electrical code for the new insulation.

“[Home insulation company] Alexander Watson indicated the cost could be anywhere between $2500 and $6000 for a 100 sqm home, not including any electrical work that might need to be conducted,” she said.

“The report itself costs $330 and would confirm whether the property requires the upgrade or not. So you would do this before going to the next stage and getting your electrical report. Alexander Watson could also provide this at a cost of $220, which would be absorbed back into the approved quote.”

Cropped view of professional workman holding knife tool in hands and cutting rockwool insulation material on ceiling in new house

All Canberra rental properties will be required to meet minimum standards for ceiling insulation by 30 November 2026. Photo: Brizmaker / iStock.

Ms Gavin said there were pros and cons to the legislation.

“It could be a significant outlay for investors. Most of our Canberra investors are not developers with multi-million dollar property portfolios. Many are mum and dad investors who have purchased a property to assist with their retirement plans,” she said.

“At the same time a lot of the older housing in Canberra can be a bit medieval, and not built for our extreme weather. The government’s hope is that not only will this benefit the environment, but tenants will save on energy bills and be more comfortable. And we generally find that happy tenants are good tenants and make for happy owners.

“Realistically however, while this is a step in the right direction in terms of better EERs, there are a huge number of factors contributing to loss of heating in housing. So the concern for investors is – what if this is just the beginning and the government imposes more changes on landlords?

“If you then have landlords raising rent or selling off rental properties because it’s no longer a good investment, it puts further pressure on a rental market that’s already stretched.”

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Ms Gavin advised investors who might be struggling with the outlays to explore the ACT Government’s Sustainable Household Scheme, which offered interest-free loans of up to $15,000 over 10 years.

“It’s all part of the government’s aim to move away from gas to more sustainable solutions, and is a great incentive if the owner is eligible,” she said.

“This is all part of the discussions we’re having with clients. The property management team is always happy to help, so anyone with questions is welcome to reach out.”

For more information about new minimum energy efficiency standards for rental homes and how they affect you, contact Civium.

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Guido Hatsis2:10 pm 12 Dec 23

Not all landlords are millionaires you know , and the interest free rhetoric has a bunch of strings attached to it, like you have to use govt approved insulators ( and as of recently there was only one or two… nice little gravy train there for those approved companies, doesn’t really pass the pub test does it?) Nice way of coaxing owners into selling up and buying over the border in NSW, it has to be said…

David Bolton3:06 pm 25 Oct 23

I held off putting insulation into my rental until 1 April 2023. After that date it became a legal requirement in the ACT and I was informed it should be tax deductible anyway. Sure was – like $7 on my outlay of $1900! No wonder people are getting out of Property investment in Canberra!

Guess who will pay in the long run. The very people they say they are protecting. Landlords will recoup however over time and will enjoy a tax deduction to boot

This is a good idea in principle- but we recently investigated getting ceiling insulation installed into our 1960s home (that we live in). It has no accessible roof space and would require either the roof to be lifted (there are no roofers available) or the ceilings to be destroyed then re installed – what happens to tenants in houses like this? I suspect that Landlords will sell and evict the tenants.

devils_advocate1:43 pm 03 Apr 23

Alternatively the house will be demolished and a new one built in its place. Thereby removing a previously “affordable” rental from the market and replacing it with a species-up McMansion that will sell for millions or rent for multiples of what the original house would have.

It’s a ridiculous idea and sounds like some kickbacks are happening.
Forcing people by law to pay huge amounts of money for something they don’t want is nothing more than mafia tactics.

“…happy tenants are good tenants and make for happy owners….” Happy tenants =many rental properties to Choose from and spending less on renting, clearly this policy will push investors to sell their properties so renters have less choices or investors will shift their losses on to the renters.

So the cost of getting ceiling insulation will go through the roof.
This will be a steady push to get more and more rights to renters until renting is the same as buying a house and you aren’t finanally benefiting from property ownership.

Next the government will push to own all the property.
Embrace, extend, and extinguish

‘So the cost of getting ceiling insulation will go through the roof.’

yes – and what’s even more concerning is that there doesn’t appear to be a free choice of supplier/tradie. People should NOT be forced to use certain companies to do renovations that they don’t want and are being forced by law into doing.
It has a really nasty feel to it all and doesn’t pass the pub test.

devils_advocate8:22 am 30 Mar 23

According to Rebecca Vassarotti’s comments, the ceiling insulation is the the thin edge of a much larger wedge regulating the “quality” of rental properties.

Instead of spending money on a depreciated asset I’ll probably just progressively terminate the leases in place and demolish the rental properties to construct units.

Might be best to just leave the property vacant.
When it gets to the point where it costs a landlord more to rent out a property than to just keep it vacant, you know the government’s policies are really bad.

devils_advocate9:43 am 03 Apr 23

Realistically renting them out permits claiming stamp duty as a deduction in the first year. Obviously nobody is going to do any maintenance on a property that has a date with a bulldozer.

I used to subscribe to the long-term buy and hold approach for rentals but it’s too difficult now. Better to just build luxury townhomes and sell them off for multimillion dollar profits, renting out properties these days just isn’t worth the risk.

Anyway if you think the rental market is bad this year, you haven’t seen anything.

Rental increases possible? I’d rather wear more clothes than have my rent go up again

When I was a young renter, that was my attitude too. I got the cheapest place I could, didn’t complain, even if shabby, run down, freezing in winter (put more clothes on) or ‘boiling’ in summer (sat on the bathroom floor which was the coolest place), and saved the money I would have paid on a more expensive place. Then I bought my own house and rented out the spare bedrooms. Freezing house; even found ice inside on one occasion. (Cheapest house on the market in the whole of Canberra at the time.) Hard though for the tenants to complain with the owner living in the exact same condition. But as for when I was a tenant, they rarely complained. People were used to living in those conditions. The rent was cheap. Some stayed for years.
Then I bought a rental property; better insulated than the house I lived in, and some of the tenants would claim. Not all, usually just the worse tenants. (Not the only thing they complained about, usually caused by them.) Possibly the cheapest rental property in all Canberra at the time; certainly for an inner city property. People could have moved, but they would have needed to pay much more for a better house in a similar locality.
However, it’s easy to put up with these conditions when young; not so much for older people who might still be in the rental market. I feel for older tenants. The government should build more (well insulated) homes for older people with low incomes, who are stuck in the rental market.
I think the time to force upgrades is when a house comes on the market, whether a private house or rental. The buyer should have to bring it up to standard within a set time. I say buyer, as a buyer can calculate the cost of upgrade with the house price. A seller might be selling because of hardship and don’t have the money to upgrade it before sale. An extra yearly fee could be charged for those who wish to knock down the house within a few years, rather than force wasted expense on an upgrade.

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