Don’t believe the real estate industry hype – Victoria’s new rental standards good news for renters

Op-ed by Kat Lucas-Healey and Joel Dignam, Executive Director of Better Renting

For the one in three Victorians who rent their homes, good news can be rarer than a mould-free rental. But last week was an exception: the Victorian government announced new energy performance standards for rental homes that will help reduce the cost of living and make rental homes healthier and safer.

So what’s going on?

The Victorian Government began the process of expanding rental standards as part of its strategic move away from fossil gas. With cheap gas running out (and being exported overseas!), households have been facing higher and higher gas bills. There are also health risks from the use of gas in homes, especially for cooking.

We also know that high energy costs and substandard homes mean that many renters are enduring unhealthy temperatures in summer and winter. Renters have little choice or control over these matters in their homes, so there’s a clear role for the government to step in and ensure that every rental home is decent to live in.

Victoria already has a minimum standard for heating appliances in rental homes. The proposed new standards will also require cooling, ceiling insulation, efficient hot water systems, and draught sealing. As a package, this means that homes will be more comfortable when heating and cooling aren’t running and cheaper to run when it is needed. The new requirements will come into effect from October 2025, although some components would only take effect when an appliance breaks down and is already being replaced — a smart approach that will help reduce costs.

The obvious benefit of this will be lower energy bills. We hear from renters who freeze in winter or struggle to pay energy bills because it’s just too costly to heat their homes. Fortunately, going from gas-ducted heating to an efficient reverse cycle can wipe 75 per cent off winter heating bills.

In summer, renters face sleepless night after sleepless night, hesitating to use the AC (if it’s even there and in working order) because of energy costs. Features like ceiling insulation will mean houses don’t heat up as much in a heatwave. Requiring ceiling insulation in rentals is estimated to save renters about $250 million by 2050.

Climate change means Melbourne faces a doubling of the number of days over 35 degrees Celsius by 2050 – that is only 26 years away – and a 2016 study estimated that heatwave deaths in Melbourne will double as a result. However, improving the energy performance of housing means that occupants face fewer hours of heat stress, which means less chance of hospitalisation or death.

When you consider these benefits, you have to be a bit sceptical about the response from the real estate industry, which, predictably, is warning about higher rents if we dare to require rental homes to be liveable in a heatwave. This lie is pretty galling because the real estate industry knows it’s not true.

When a landlord rings up a property manager and asks how much they can rent out a property for, the agent doesn’t ask them about their costs or how much tax they pay. They give them an answer which is based upon what similar properties are going for. Basically: it’s about vacancy rates and the state of the market. Landlord costs affect how much profit landlords make. They don’t determine rents. Landlord-driven rent increases have added $3,600 per year to the median Victorian rental asking price in the last 12 months alone, so it’s only fair that renters have decent homes to live in.

That said, the proposed changes aren’t perfect. Renters whose homes have poor ceiling insulation will miss out on any improvement. And there’s nothing around cooktops, so renters may be stuck paying expensive gas connection fees just to be able to cook at home. Gas connections are such bad value for money that households using gas only for cooking would be hundreds of dollars better off each year by refilling gas bottles instead.

We would like to see the Victorian Government implementing financial support for property owners, potentially funded by the Commonwealth. The other major gap is compliance. It is not fair in today’s tight rental market to put the onus on renters to ensure landlords meet the minimum standards. The Allan government needs to make sure these new standards are strongly and proactively enforced.

For too long, renters in Victoria have had to deal with expensive, unsafe, unhealthy housing: too cold in winter, too hot in summer, with expensive and polluting gas appliances. These proposed changes are an important step in the right direction, helping to ensure that more people can have healthy and affordable homes.