The ACT is the only jurisdiction in Australia with a mandatory energy efficiency disclosure scheme. In theory, it is a committed advocate for more energy efficient, comfortable homes.
But in reality, low compliance and minimal enforcement means that renters, landlords, buyers, and sellers are missing out on the potential benefits.
The ACT has one of the world’s oldest energy efficiency disclosure schemes for real estate.
Disclosure of an energy efficiency rating (EER) has been mandatory when selling a property since 1999 and since 1997 for rentals, if an EER exists.
This disclosure scheme seems to reward sellers who are offering homes with higher energy efficiency. A recent study found that a dwelling with an EER of 6 attracts a premium worth about 2 per cent—that’s a cool $10,000 on a $500,000 property—while a home with EER of 0 sells for about 3.1 per cent less than one with an EER of 3.
However, it’s clear that this disclosure scheme is hampered by some flaws.
An advertisement for a property for sale or lease is meant to disclose an EER based on the ACT House Energy Rating Scheme (ACTHERS), which ranks a property on a scale from 0 to 6. However, new properties that haven’t been occupied can be advertised with a rating based upon the National House Energy Rating Scheme (NatHERS).
This makes things harder for buyers or renters, because the two schemes are not equivalent.
But if you’re looking to rent a home, it gets even harder.
About two in three rental advertisements in the ACT don’t disclose an EER at all. This could be because no EER exists. But some researchers have suggested that the omission could be because the owner is deliberately hiding a disappointing score.
Considering that the energy efficiency of a property could be worth around $3000 a year, this is a pretty significant gap.
Even worse, properties in areas with lower socioeconomic status are more likely not to disclose an EER. In the most socially-economically deprived areas of the ACT, eight in 10 rental properties don’t disclose an EER. In better-off areas, it’s closer to only seven in 10.
Thus, the people most vulnerable to high utility costs are denied the chance to know how much their home might cost to run.
The problem isn’t helped by the limp-wristed approach to enforcement taken by the regulator. In the rental market, a failure to comply with disclosure requirements has a potential fine of $1,250. It’s a “strict liability offense”, meaning that it’s an offense even if it was unintentional.
Yet prosecutions are unheard of, even though it’s easy to find property listings that fail to disclose an existing EER, or don’t state that none exists. Perhaps that’s why some academics have described the ACT’s rental disclosure scheme as “de facto voluntary”.
While making it mandatory to disclose a home’s EER is a good step by the ACT Government, it isn’t enough to ensure that renters have fair access to the benefits of energy efficiency.
Instead of this “de facto voluntary” regulation, the ACT Government must set a mandatory minimum energy efficiency standard for rental properties, so that all renters get a home that is healthy and liveable through summer and winter, at an affordable cost.
Energy-efficiency disclosure legislation is a good idea. But in the current market, it’s simply not delivering the promised benefits of energy-efficient homes. All renters deserve liveable homes, and the ACT Government should make it happen for its constituents.
Joel Dignam is the Founder of Better Renting, a community of renters working together for stable, affordable, and liveable homes. He has previously worked as a campaigner and community organiser.