The cost of inefficient rental housing in South Australia

This week Better Renting is presenting at the Essential Services conference being put on by SACOSS. We will be speaking about who pays the cost of inefficient housing. As part of this, we have updated our Cost of Complacency analysis. This report looked at the cost of inefficient rental housing in New South Wales; we have updated it to look at the South Australian context using up-to-date figures.

The Cost of Complacency attempts to quantify the value of what renters are missing out on due to government inaction on inefficient housing. We do this by estimating how much free energy renters would get from a better-quality home, and the market value of this energy. Our methodology is detailed in our earlier report. We can apply the same methodology to rental homes in South Australia. This involves:

  • Identifying the number of rental households in South Australia. According to the latest Census, this is about 190,000 households.
  • Estimating the energy performance of different households. This is difficult - there isn't good data available. We make an estimate based upon the rated energy performance of Victorian households.
  • Using this to estimate how much extra energy these households use per year, compared with a more efficient home. We choose a NatHERS rating of 3 as the baseline, so any household with an estimated rating below this uses extra energy. We assume an average floor area of 149.7m2, based upon historical data. 
  • Calculating the market value of this energy - that is, how much you'd have to pay to get the same amount of warmth in your home. We estimate that some rental households have efficient heaters, which reduces the total energy cost by about 20%. We estimate that each kWh costs 36c.

It turns out that South Australia has higher energy costs than NSW and a less mild climate. These factors both increase the per-household amounts. We estimate there are 145,000 rental households that would benefit from efficiency standards. The average benefit for each such household is $2800 per year. The worst households - about 42,000 - benefit by about $4500 per year. In total this is about $410 million per year.

Note that:

  • This benefit is not energy savings. If a rental household did heat their home in line with the NatHERS modelling, then improved efficiency would allow them to achieve the same thermal outcome at a reduced cost. In reality, most inefficient rental households probably under-heat their homes. The benefit for these households is in free energy, giving them a warmer, more comfortable, and healthier home.
  • The energy prices are based around April 2023. Recent estimates suggest that default electricity prices may increase by 25%. This would dramatically increase the potential benefit to renters - bringing it up to over half a billion dollars.
  • We are talking about a large amount of energy per affected rental houseshold. It is equivalent to running two 2kW heaters non-stop from 1 June through 30 August. 

If governments introduced minimum energy efficiency standards for rental homes, substandard rental homes could be improved through basic efficiency measures like draught-sealing and window treatments. Getting rentals up to scratch like this would mean that renters benefit from free energy to keep them healthier and more comfortable in winter. For the least efficient homes, this is $4500 per year of free energy. For an average inefficient home, it's about $2800 per year. Across all of South Australia, the total value is just over $400 million per year.