Lachlan Smith

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Being Green in the Nation of Landlords

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May 10, 2016


Thanks to negative gearing Australia is becoming a nation of landlords. It is hard enough being green at home when you have a mortgage, but when you're a renter it is even harder. Many of the easy gains available to owner occupiers are simply not available to renters which presents problems in trying to convince people to reduce resource use in the home.
 
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In Australia when signing a rental lease you face unknown energy and often water use costs. Depending on the energy and water efficiency of any appliances and appurtenances fitted to the property energy costs can vary dramatically. The renter has the bare the costs of running the property and given leases are fairly short term, usually only a year there is no incentive to make improvements.
 
The Australian Government runs the energy star and water (WELS) star programmes that rate all major household appliances for energy and water usage. This model assumes that a rational consumer will pick appliances not based solely on the capital costs, but on the total costs over the life of the product, and perhaps even spending slightly more for a more efficient appliance, even choosing one that is more suitable for their needs.
 
In the landlord vs tenant equation, when a landlord buys a dilapidated property that requires work to put it on the rental market, they only represent the capital cost of the property. Energy efficiency is not even considered in the economic equation and the energy star model falls apart. Fortunately when it comes to heating or cooling losses BASIX has you covered, as long as the landlord has to spend more than $50 000 to be able to bring the property up to a habitable standard. The targets present a significant reduction in energy and water use for dwellings subject to BASIX requirements (only in NSW). For unimproved or minimally improved dwellings that are turned into rentals there is no minimum standard for energy or water usage like there is for new homes.
 
In the tenant vs landlord equation a tenant is similarly uninclined to make capital improvements to their landlords property. Rental agreements are typically one year and the capital costs of replacing any of the landlords fixtures cannot be fully amortised if the renter is asked to leave at the end of the rental agreement. This also rules out making improvements such as adding insulation, solar panels, efficient hot water system and the like. Simply put neither party is invested in improvements to the dwelling and the energy and water intensity remains high.
 
Compounding the matter is that lower income households tend to be renters and are subjected to higher energy and water costs than those who can afford to be owner occupiers. This is on top of driving lower incomes into the suburbs where they are more reliant on cars to travel further distances.
 
To properly be incentivised in the energy intensity of a property government policy should incentivise people to be owner occupiers rather than landlord renters as they currently are. The rhetoric of buy someone with capital growth and rent where you want to live is stale. People are left wondering why they cannot afford to buy a house which later comes on the market for rent within their budget. And in that process have no recourse to be fully invested in their home and their community, including it's energy and water efficiency.
 
Further Reading:
The Environmental Sustainability of Australia's Private Rental Housing Stock [Melbourne Institute]

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