But consultation documents released on Monday say any rise in rents should be mostly offset by cheaper household bills as a result of more-efficient insulation,draught-proofing and fixed cooling units,shower heads,hot water systems and heating systems stipulated by the standards.
Landlords could leave the market under proposed new rental standards,reducing supply,government departments have said.Peter Rae/AFR
The standards would be staggered from October next year. Appliances would not need to be upgraded until existing ones reached the end of their lives,and insulation and draught-proofing would need to be upgraded at the start of a new lease.
State Consumer Affairs Minister Gabrielle Williams said the upgrades would save renters money by driving down power bills,that the change would not be a huge impost on landlords and that costs were unlikely to be passed on to tenants.
“If you’re looking at some of the more potentially costly replacements,these are costs that are being incurred by landlords in any case[when an appliance reaches the end of its life and needs to be replaced],” Williams said.
However,the Department of Government Services and the Department of Energy,Environment and Climate Action said that while there would be no significant long-term effect on rents or rental stock,there might be short-term pain.
In documents released on Monday,Commissioner for Better Regulation Cressida Wall said:“The departments acknowledge that it is likely that at least some of the costs will be passed on to tenants,and that recent cost-of-living pressures and interest rate rises may limit the amount of cost increases that rental providers and rooming house operators can absorb.
“The departments explain that rental supply may contract in the short term as providers undertake upgrades to comply with the new minimum standards. The departments also explain that these impacts will be limited by varying when compliance with each standard is required,and as some of the preferred options account for potential implementation risks (e.g. supply chain issues).”
Consultancy Deloitte,in a regulatory impact statement for the departments,said the effect on the rental market was likely to be minimal.
“While some rent increases might occur,these will be offset to some extent by energy savings for renters,” it said.
Vacancy rates in Melbourne have been at a record low of 0.8 per cent,according to. Median asking rents for houses had increased to $570 a week in the March quarter,the latest Domain Rent Report said.
Energy Minister Lily D’Ambrosio said new heating and cooling systems could save renters $215 a year,while the lower-cost option to upgrade a hot water system would save tenants about $113 a year. The government said the total savings could be $567.
D’Ambrosio said the cost to a landlord of all upgrades would be about $5000,but this would be spread over several years. Some homes would not need all the upgrades if they already reached the standard.
“For those landlords who may wonder,‘Well,what’s in it for me?’ The important thing … for them to understand and remember is that it actually does improve the resale value of a property,and there’s a win here for everyone,” D’Ambrosio said.
Jennifer Beveridge,chief executive of Tenants Victoria,said renting was an essential service,and the living standards of one-third of Victorians would improve as a result of the proposal.
“When the original minimum standards for rentals were introduced in 2021,the sky certainly did not fall in for landlords,” Beveridge said.
Commissioner for Residential Tenancies Heather Holst said draught-proofing and insulation was particularly welcomed because heating and cooling was inefficient in many rental homes.
“Many renters have told me over the years about it all just disappearing out through the roof or through the cracks,” Holst said.
Real Estate Institute of Victoria president Jacob Caine said landlords could end up selling their homes,worsening vacancy rates further,if they were put under more financial strain.
“While we recognise these changes are needed to help realise the state’s net-zero targets,the new requirements also come at a time when many rental providers may not be able to afford to make them,” Caine said.
Consultations close in July before new standards are determined in October. Caine asked the government for more time to analyse and understand the impacts.
Environment Victoria’s Dr Kat Lucas-Healey said ceiling insulation was the bare minimum.
“The government needs to make sure these new standards are strongly and proactively enforced,” Lucas-Healey said. “It’s simply not fair to put that responsibility onto renters.”
Opposition housing affordability spokesman Evan Mulholland said costs would be passed on,and that land tax increases were already making landlords question whether they could continue.
“The people that are going to pay for that are vulnerable renters who need to get a roof over their head,” Mulholland said. “Investors are fleeing the state.”
Sweltering Cities executive director Emma Bacon said too many Victorian renters had sweated through hot days and nights last summer.
“Unfortunately,we know that lots of people are second-guessing whether they can afford to even turn on air-conditioning in summer,” she said.
Every rooming house bedroom will also need a heater under the proposal.
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