bank | 14th May, 2010

Greening your property makes money (and sense)

These days improving the environmental performance of your rental property is a smart move for landlords, especially with the possibility of regulations in the future which give homes green star ratings.

Investing in sustainability increases your property’s resale value

In the ACT landlords have to disclose information about the energy, greenhouse and water efficiency of their property when they put it up for sale or lease. This mandatory disclosure scheme was agreed to in principle by all Australian governments in 2009, but implementation has stalled in Victoria due to a lack of commitment from the state government.

The scheme in the ACT has been operating since 1999, and rates houses from zero to ten stars. There, buyers have been going for an energy efficient house over a similar house without the efficiency benefits, bumping the value of greener houses up, often by much more than the cost of the improvements. That is, the owners make a profit, the environment benefits and the people that live in the home, whether they are renters or the new owners, use less energy and water, save money, and have a more comfortable, better quality home.

A study of their scheme found that increasing the energy performance of a house by one star increased its value by about 3%. This means that spending $1200 on insulation could increase the value of a $400,000 property to $412,000. Soon buyers here will know the star rating of all properties on the market, so investing in sustainability is a smart move.

Greening your property cuts your tax

Many of the changes you could do to make your rental property more sustainable are tax deductible. This includes repairs, maintenance and servicing, so covers repairs to hot water systems, heaters, air conditioners and insulation (e.g. if it is damaged or has settled).

You can also claim deductions for capital works expenses and for the loss of value of assets over many years. This means that you can claim for things like:

  • replacing a hot water system with a more efficient one, like gas or solar
  • insulation
  • solar power
  • an energy efficient heater or air conditioner
  • curtains
  • skylights
  • clotheslines
  • ceiling fans
  • water tanks, water efficient toilets, taps or showerheads
  • internal doors to help with efficient heating and cooling
  • external blinds, awnings or pergolas for shading windows, and
  • buying appliances which are energy efficient.

For all the details, contact the Australian Tax Office on 13 28 61, speak to your accountant or read the tax office’s guide to rental properties. 

Happy tenants make happy landlords

If you’re not already persuaded by the financial incentives, then consider how this investment will help you retain good tenants. A green property is likely to be warmer in winter and cooler in summer and cheaper to run. Making tenants more comfortable and reducing their bills will make them more likely to stay in your property and keep paying the rent. These factors will also make your property more attractive to new tenants making it easier and quicker to rent out.

 It’s good for the planet!

Of course the other good reason for greening your property is that it’s doing your bit to protect our environment. Installing insulation can reduce your property’s greenhouse gas emissions from heating and cooling by 45%. Even little things like blocking draughts can save 40 kg of greenhouse gases every year, and cost next to nothing. And installing a 5,000 litre water tank could save 52,000 litres of water, every year. Now that’s something to be proud of.

Read more sustainability tips for renters.

Read a story from a green landlord.