By Frank Newman on 29th May 2018
Budget 2018 included $142 million over the next four years to help 52,000 lower-income owner-occupied households insulate their homes. The new grant will cover up to two-thirds of the insulation cost (ceiling and underfloor), and will be extended next year to include the cost of installing a heating device. That’s the good news.
The bad news is landlords do not qualify, and the Warm Up New Zealand scheme that has been available to landlords ends on 30 June 2018. That scheme paid up to 50% of the cost and had a target of subsidising 20,000 thousand houses, but so far only 11 thousand grants have been made. Not all rental properties qualified for that scheme as it only applied if the tenant has a Community Services Card or they have a health issue related to living in a cold or damp environment. The $9 million of the $20 million allocated that remains unspent will be transferred to the new scheme.
After 30 June there will be no financial incentive for landlords to insulate a rental property. The only government incentive will be that if they don’t meet the new legal standards by 1 July next year they could get whacked with very significant exemplary damages.
There is some debate why it is that there was not a better uptake of the Warm Up New Zealand scheme by landlords. The most likely reason goes back to the way the scheme was set up. To better manage the funding and to ensure quality, the Government limited the number of installers to 14 nationwide. That’s understandable given the number of cowboy operators in the building industry.
According to Andrew King, speaking on behalf of the NZ Property Investors Federation, a problem with the scheme has been that when landlords obtained quotes to do the insulation work from the government’s accredited installers the cost was twice as much as the price they obtained from other installers and significantly more than the DIY cost. Clearly many landlords have done a DIY installation or had someone else do it at a price cheaper than their net cost through a subsidised installer.
If you have a rental property that needs to have insulation installed or upgraded, then you had better get cracking if you want to take advantage of the subsidy, but do get a competitive quote and check out the cost of doing it yourself.
Nationwide mandatory insulation requirements were first introduced in 1978 and are expressed in R-values, which is a measure of thermal resistance (the higher the R-value the better the thermal performance). The new legislation requires all residential rental homes to have a minimum prescribed level of insulation, set at the standards that prevailed in 1978. If a rental was built after that date, and the insulation is still in good condition, then no upgrade is required. There are some exemptions, and the legislation does take into account situations where it’s not practical to retrofit insulation because of the physical design or construction of the property until access to these spaces is gained.
As from 1 July any new tenancy agreement must include an Insulation Statement, which must record if the rental has insulation, where it is, the type, and its condition. That allows tenants to make more informed decisions about renting. The Insulation Statement may be completed by the landlord or their property manager, or someone else, and a number of insulation companies are offering this service for a fee. For those who do want to do a DIY Insulation Statement, the tenancy.govt.nz website has a page specifically about “writing-an-insulation-statement” (enter “insulation” in their search tool). This takes the reader through three steps and includes examples of the text to include. It’s well done and easy to follow – the difficult part is actually getting under the house or into the ceiling cavity to do the inspection, and knowing whether existing insulation is up to standard.
Insulation is not the end of the matter for landlords. The Healthy Homes Guarantee Act which was past last year has yet to establish regulations requiring the installation of heating. Landlords will be whacked again – probably requiring a heat pump or wood burners where local authority regulations allow.
The real incentive for landlords is providing a more comfortable home for tenants. Landlords get that message, but upgrading the quality of a home comes at a cost which means rents will rise because landlords need to achieve a return on the money they have invested.