Big banks join call to harmonise home energy ratings

Home buyers reviewing a potential purchases could add high energy star rating to their list of requirements, if a powerful lobby of housing interests wins the federal government over.

A lobby of 13 banks, insurers, super funds and building lobby groups is calling for a new rating system for Australia’s housing stock to allow buyers and renters – and banks and insurers – to see exactly how a house or apartment stacks up on energy efficiency.

In a joint statement, they urged the federal government to adopt a single national home energy rating system for existing homes, mandatory energy performance disclosures for existing homes, and measures to improve the energy performance of rentals.

The national rating system could help unlock more finance for home upgrades, the joint statement said.

The national, mandatory energy disclosures could ensure home buyers know what they’re getting, and give banks access to better data on Australia’s housing stock.

And standards to improve rentals will keep renters healthy and lower energy bill stress.

“For insurers, improving the resilience of Australian homes to extreme weather can help ensure homeowners have access to affordable home insurance,” the joint statement said.

A national database of “resilience upgrades” would allow insurers to offer “premium discounts” to homeowners who’ve upgraded their property, says Allianz Australia CEO Richard Feledy.

“Insurers are at the forefront of climate impacts. A national rating framework would help us support our policy-holders in making better choices when repairing or re-building their homes following an insurance event. Allianz would also welcome further work to integrate resilience considerations into home ratings frameworks so that Australian homes are built and repaired to better withstand extreme weather and other climate impacts,” he said.

Must be a policy suite, not a single sweet policy

Climate Council senior researcher Carl Tidemann says they’ve been recommending mandatory efficiency disclosure for some time, but it has to come with a suite of measures to support change, such as interest free loans and minimum energy efficiency targets.

“Energy efficiency targets are really important. The federal government has a real role, whether it’s harmonised standards between the existing state ones or whether there is a federal target, because some states already have schemes that arguably look at aspects of energy performance,” he told RenewEconomy.

But banks using individual house ratings to design financial products could also have a perverse effect on what kind of home banks think Australians should be allowed to buy.

“I don’t think banks should be able to penalise your loan [if you’re buying a house with a low rating]. It should only be carrot rather than sticks. There’s a need for regulations outside of home loans to actually address the problem that it’s trying to solve.”

The government has announced there will be money in the coming budget for home electrification changes, and Tidemann hopes some of that will be for interest-free loans as well as higher level frameworks to guide the overall system.

“There’s a real groundswell at the moment, it seems that energy efficiency is gaining more attention, and it seems the federal government is listening.”

Let’s just pick one, shall we?

Currently there are a range of different energy efficiency standards for buildings around the country.

The national, 10-star Nationwide House Energy Rating Scheme (NatHERS) relates to energy efficiency but doesn’t take into account energy use. It applies to all new homes, and significant renovations.

Victoria and South Australia have a minimum seven star efficiency requirement, while New South Wales (NSW) has launched its own Building and Sustainability Index (BASIX) which applies to new builds and renovations over $50,000.

The ACT has its Energy efficiency requirements (EER), Tasmania has a NatHERS six-star minimum, while West Australia and Queensland have a mix of five and six star minimums.

“Finalising and implementing a single, easily understood, national performance rating for home energy performance, and mandating disclosure at point of sale is a vital first step that can pave the way for improving the energy performance of Australia’s existing housing stock,” says Alison Scotland, executive director of the Australian Sustainable Built Environment Council.

Banks keen for guidance

Housing contributes about 11 per cent of Australia’s national greenhouse emissions, due to a legacy houses that can’t be properly heated or cooled affordably. For example, Victoria has some 1.3 million detached houses with NatHERS ratings of two stars or less.

Banks are particularly keen on a single standard. The joint statement signed by Westpac, NAB, Bank Australia and CBA said helping mortgage-holders improve the performance of their homes “can strengthen relationships with customers and help deliver our net zero commitments”.

“A single national rating framework and reliable data are needed to enable banks to increase the range and uptake of financial products that can support customers to accelerate home upgrades in Australia,” says Australian Sustainable Finance Institute CEO Kristy Graham.

But banks need to be part of the conversation, says Energy Efficiency Council CEO Luke Menzel because upgrading Australia’s housing stock will cost billions.

Millions of homes needs to be fixed both to hit net zero targets and to save consumers money and protect their health from bad housing, he says.

“It will require billions of dollars of private sector investment. Governments can unlock that investment with some common-sense reforms, and target direct support towards renters and other vulnerable households that are at risk of being left behind.”