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Landlords adding insulation ahead of July deadline

Friday 1st February 2019

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Landlords appear to be upgrading properties ahead of a July deadline for mandatory insulation, but not quickly enough to clear a backlog projected by the government.

Government-funded insulation grants for landlords ended last June. In November the Ministry of Business, Innovation and Employment estimated that, as of February last year, there could be almost 173,000 private rental properties still needing upgrading.

Smart Energy Solutions, the country’s biggest home energy efficiency company, says there has been an increase in business from landlords.

But director Paul Thomson said the uptake was nowhere near enough to meet the projected shortfall by the July 1 deadline. From that date rental properties must meet the 1978 standard for ceiling and underfloor insulation where practicable.

“The uptake has increased but is still not what we had budgeted for,” said Thomson, himself a landlord. “We thought there would have been much greater uptake.”

Recent work for landlords was only about 20 percent of what his firm had expected.

After a decade and more than $450 million of state spending, stories of damp or mouldy rental properties still feature in the media. But there are no firm numbers on how wide the problem is.

During the past nine years, government grant schemes have helped insulate almost 315,000 homes, about 66,000 of them rental properties. The Crown has spent $459 million on various Warm-Up New Zealand programmes since 2009, delivering $420 million of grants that were supplemented with further grants from councils and community groups.

But even in the early years, there was a nagging doubt that the schemes run by the Energy Efficiency and Conservation Authority were catering for the most vulnerable in the community living in rental accommodation.

Landlords were always eligible for grants, but from 2013 the schemes were more targeted at homeowners and tenants with housing-related health needs. The Residential Tenancies Act was amended in 2016 – putting in place this year’s insulation deadline – and additional Ministry of Health funding was made available for property upgrades for those with high health needs.

The two-year insulation programme run from 2016 was then focused solely on landlords, but the Crown met only 25 percent of the cost. After a surprisingly low take-up in its first year, it would eventually insulate 13,126 rental properties – out of the 20,000 targeted. Roughly a third of its $18 million budget was unspent.

MBIE estimates New Zealand has about 521,000 private rental properties. In 2016 it estimated that about 202,000 of them could need retrofitting before July 2019.

It believes about 67 percent now comply, but acknowledges the lack of hard data. Its estimates are based on retrofits reported by installers and come with “large margins of error”. That could leave the number of properties needing upgrades anywhere between 125,800 and 219,600, MBIE said in November.

And even if a property doesn't comply, how material is the harm?

A 2017 survey of the rental sector the Building Research Association of New Zealand, Massey University and the University of Otago found that 82 percent of tenants surveyed said their housing was adequate. About 4 percent said it was unhealthy or damp and a similar percentage said it was hard to heat.

But BRANZ also said many tenants had low expectations and this was consistent with a 2012 survey of housing conditions. In that study only 2 percent of tenants considered their dwelling to be in poor condition, compared with the 44 percent reported by inspectors.

Smart Energy’s Thomson says there are many good landlords and he is concerned the whole sector gets tarred by the poor performers. He believes insulation – and even extractor fans – would be an obvious choice for most landlords given that keeping a house warm and dry extends the life of the asset and potentially reduces costly turnover of tenants.

Despite that, and even with the looming “stick” of the July insulation deadline, he noted that the final year of EECA’s Healthy Homes programme for landlords had been a “pretty hard sell.”

The New Zealand Property Investors’ Federation has about 7,000 members owning more than 35,000 rentals.

Executive officer Andrew King said it is hard to get a sense of how material the number of cold, uninsulated rentals is. He suspects some of the estimates “bandied about” within government were shaped by EECA’s experience with its earlier programmes.

While the association has been advocating insulation – and arranging deals for its members – for more than a decade, many didn’t participate in the EECA schemes.

King said a lot of properties already had insulation. Some members chose to install insulation themselves and others found that – even with EECA grants then available for heating – there were cheaper options outside the scheme.

King said a recent survey of association members showed more than 90 percent were already compliant.

“It wasn’t a big issue.”

The Labour government last year introduced the Healthy Homes Guarantee Act, which will set new standards on the insulation, heating and ventilation needed in rental homes. The new standards, and the timeframe for introducing them, will be announced later this month.

Last year, it also committed $142 million to EECA’s new Warmer Kiwi Homes programme, which will help fund insulation and heating over four years.

But the new scheme is only for homeowners and meets up to two-thirds of the cost of ceiling and underfloor insulation. From July it will also meet up to two-thirds of the cost of electric, gas or wood-fired heating systems.

Energy and Resources Minister Megan Woods this week acknowledged the greater potential need for upgrades of some rental properties, but said that should be addressed by the mandatory insulation standards effective from July.

She said there is still real need among some homeowners, and more than 3,200 installations had already been completed under the new programme. It is aiming to complete 10,000 a year.

To be eligible for a Warmer Kiwi Homes grant, an applicant must own and live in the home to be insulated, which must also have been built before 2008. They must also have a community services card or SuperGold card, or live in an area identified as being lower-income, or have been referred by their district health board through the Healthy Homes Initiative run by the Ministry of Health.

Woods said the higher grant threshold from the government, coupled with contributions from third-party funders around the country, means the scheme will be able to insulate homes in Northland, South Auckland and Gisborne at no cost to the homeowner.

In many other parts of the country, homeowners may only have to contribute 5 percent of the cost.

Forty-one groups, including councils, district health boards, lines companies and community trusts have provided $4.7 million for the current year’s programme.

(BusinessDesk)

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