Download Environmental Future Funding Package - NSW

Reforming Building & Planning Laws
Submission to the
Office of Environment and Heritage
Environmental Future Funding Package
19 December 2016
ABOUT THE HOUSING INDUSTRY ASSOCIATION............................................................................................................... II
1.0 INTRODUCTION ....................................................................................................................................................... 1
2.0 DRAFT STRATEGIC PLAN 2017 TO 2022 .................................................................................................................... 1
3.0 A DRAFT PLAN TO SAVE NSW ENERGY AND MONEY ................................................................................................ 2
3.1
3.2
3.2
RATINGS FOR HOMES .................................................................................................................................................... 2
TENANTED HOMES ....................................................................................................................................................... 3
NEW HOMES............................................................................................................................................................... 3
4.0 CONCLUSION ........................................................................................................................................................... 5
Housing Industry Association contact:
Troy Loveday
Assistant Director, Residential Development & Planning
Housing Industry Association
4 Byfield Street,
MACQUARIE PARK NSW 2113
Phone: 02 9978 3342
Email: [email protected]
-i-
ABOUT THE HOUSING INDUSTRY ASSOCIATION
The Housing Industry Association (HIA) is Australia’s only national industry association representing the
interests of the residential building industry, including new home builders, renovators, trade contractors, land
developers, related building professionals, and suppliers and manufacturers of building products.
As the voice of the industry, HIA represents some 40,000 member businesses throughout Australia. The
residential building industry includes land development, detached home construction, home renovations,
low/medium-density housing, high-rise apartment buildings and building product manufacturing.
HIA members comprise a diversity of residential builders, including the Housing 100 volume builders, small to
medium builders and renovators, residential developers, trade contractors, major building product
manufacturers and suppliers and consultants to the industry. HIA members construct over 85 per cent of the
nation’s new building stock.
HIA exists to service the businesses it represents, lobby for the best possible business environment for the
building industry and to encourage a responsible and quality driven, affordable residential building
development industry. HIA’s mission is to:
“promote policies and provide services which enhance our members’ business practices, products and
profitability, consistent with the highest standards of professional and commercial conduct.”
The residential building industry is one of Australia’s most dynamic, innovative and efficient service industries
and is a key driver of the Australian economy. The residential building industry has a wide reach into
manufacturing, supply, and retail sectors.
The aggregate residential industry contribution to the Australian economy is over $150 billion per annum, with
over one million employees in building and construction, tens of thousands of small businesses, and over
200,000 sub-contractors reliant on the industry for their livelihood.
HIA develops and advocates policy on behalf of members to further advance new home building and
renovating, enabling members to provide affordable and appropriate housing to the growing Australian
population. New policy is generated through a grassroots process that starts with local and regional
committees before progressing to the National Policy Congress by which time it has passed through almost
1,000 sets of hands.
Policy development is supported by an ongoing process of collecting and analysing data, forecasting, and
providing industry data and insights for members, the general public and on a contract basis.
The association operates offices in 23 centres around the nation providing a wide range of advocacy, business
support including services and products to members, technical and compliance advice, training services,
contracts and stationary, industry awards for excellence, and member only discounts on goods and services.
- ii -
1.0
INTRODUCTION
HIA welcomes the opportunity to provide comments to the Office of Environment and Heritage (OEH) on the
Environmental Future Funding Package released for comment in November 2016. Forming part of the
Government’s Climate Change Policy Framework, the package aims to achieve net-zero emissions by 2050
allowing New South Wales to become more resilient to a changing climate.
The Environmental Future package comprises two draft consultation papers:


Climate Change Fund - Draft Strategic Plan 2017 to 2022
A Plan to Save NSW Energy and Money
The Climate Change Fund Draft Strategic Plan sets out the Government’s strategy to tackle climate change
over the next 5 years. A total of $500 million from the Climate Change Fund will be allocated to potential
actions that have been designed to meet the aspirational targets set out in the NSW Climate Change Policy
Framework. HIA does not object to the Government’s intentions in this area, however, the impact of
increasing BASIX targets on some new homebuyers may be considerable. More detailed discussion of these
impacts is provided elsewhere.
“A Draft Plan to Save NSW Energy and Money”, is the detailed plan prepared by the Government to outline
specific actions designed to reduce the consumption of energy in New South Wales. The majority of these
actions will have no direct bearing on the residential home construction sector and HIA is supportive of these
measures.
The proposed action that is likely to significantly impact on the new home construction sector is the proposal
to increase the BASIX energy target from 1 July 2017 from 40% to 50%. This proposal is a variant of an initiative
put forward by the Department of Planning and Environment in 2013 that sought to increase the energy and
water targets from 40% to 50%. The current proposal only involves an increase to the energy savings target.
2.0
DRAFT STRATEGIC PLAN 2017 TO 2022
The Government’s Climate Change Policy Framework will be implemented based on the initiatives contained in
the Draft Strategic Plan. Potential actions (and funding) that will deliver outcomes to realise the plan’s
objectives have been grouped into three categories:
 Accelerating advanced energy (up to $200m)
 National leadership in energy efficiency (up to $200m) and
 Preparing for a changing climate (up to $100m).
The policy area likely to have the most significant impact on the residential construction sector is the National
leadership in energy efficiency, which includes a reduction in energy costs for households and businesses. The
Government wants to make it easier for households and businesses to save energy and reduce electricity/gas
bills. Potential actions identified include a proposal to “consult on increasing future NSW Building and
Sustainability Index targets for new homes to encourage industry innovation and best practice, and reduce
energy bills”. This proposal has been justified on the basis that embedding energy efficiency into products and
dwellings can save households and businesses energy and money.
In a general sense, HIA supports the Government’s proposal to develop responses to climate change, including
a broad suite of actions to help cut electricity and gas bills. Many of the proposed actions are likely to be
successfully implemented and if properly managed will deliver the desired savings to consumers.
Page 1 of 5 | Future Environment Funding Package
The implementation of the energy initiatives targeted at the domestic housing sector will deliver benefits to
consumers at little cost as the costs will be met by others or shared, in particular, rental investors, State
agencies and Strata corporations. There is no doubt that the requirement for new homes to meet higher
BASIX targets (up from 40% to 50%) will have an impact on the cost of house construction (likely to be costs of
additional roof/wall insulation and more efficient window glazing). HIA does not support the current proposal
to raise the BASIX target and the reasons for not supporting the proposal are outlined in Part 3.2.
3.0
A DRAFT PLAN TO SAVE NSW ENERGY AND MONEY
The Draft Plan to Save NSW Energy and Money (the Plan) acknowledges that the 3 million homes in NSW use
about 18,500 Gigawatt hours of electricity each year. Domestic electricity use accounts for some 27% of all
electricity use in the State. During 2014-15 each household in NSW paid, on average, about $1,880 on
household electricity bills.
In that context, the Government has developed six options that it anticipates will help NSW households to
save energy and money. Some of these options are likely to have a significant impact on the residential
construction sector and therefore the following comments are provided.
3.1
RATINGS FOR HOMES
Action 2.1 of the Plan proposes the establishment of a framework for the provision of energy efficiency ratings
for homes at the point of sale to inform home buyers about comfort and the costs of running a home. The
proposal will offer two benefits – allowing buyers to understand the energy efficiency performance of a home
they are considering purchasing and to allow vendors to communicate the energy efficiency benefits of their
homes.
HIA understands that the proposal being considered by the Government involves the creation of a voluntary
program which will allow home owners to assess energy-efficiency performance ratings for their property and
to disclose the rating during the sale process. Such a scheme would operate on a voluntary basis initially with
the intention that it transition to a mandatory program in 2020 if it is demonstrated to be efficient and
effective.
HIA has considered the issue of environmental performance of existing homes and the merits of voluntary and
mandatory disclosure at the point of sale or lease, supporting the introduction of a national scheme since
2008. The introduction of a mandatory disclosure scheme at the time of sale or lease of an existing home may
provide a method of forewarning a potential purchaser/occupier of environmental performance of an existing
home. The benefits that may be associated with voluntary or mandatory disclosure of this information would
be a way to improve the public’s knowledge and understanding of what may be achieved in terms of energy
efficiency and potentially other outcomes such as water efficiency. This information could then become the
basis for understanding potential power and water bill savings.
HIA would support both a voluntary and a mandatory disclosure program comprising a simply checklist of
minimum energy and/or water efficiency measures that would be completed prior to the sale or lease of an
existing home. For homes built post-2003 and was required to meet an BASIX rating, that assessment should
be deemed to satisfy any disclosure requirements for an agreed period of time after the home has been
constructed.
HIA has been part of the working groups recently established by the OEH to discuss implementation of a
voluntary disclosure scheme in New South Wales, on behalf of the Federal government. Whilst it would be
preferable that the scheme be introduced nationally in line with the recommendations of the National Energy
Page 2 of 5 | Future Environment Funding Package
Productivity Plan, a trial or pilot in NSW could be a practical option and would assist NSW home buyers and
renters.
3.2
TENANTED HOMES
As outlined above in relation to the disclosure of energy rating information for the sale of existing homes, HIA
has supported in principle the extension of this type of scheme to rental properties. In addition to this, the
Plan proposes three options which would either require or assist an owner (landlord) to make improvements
to a rental property.
This approach is generally referred to as mandatory action and it needs to be recognised that unlike water
efficient fittings, changes to improve energy performance in an existing home cover a vast range of price
points. Not all will be appropriate for every home and some landlords may seek to increase the rental price for
a property based on these improvements. If the three proposed options for action are pursued it will be
important to ensure there are no unintended consequences on the affordability of rental properties which
override the savings in operational costs.
3.2
NEW HOMES
BASIX Target Increase
The Plan proposes an increase in the energy target under the Building Sustainability Index (BASIX) from 1 July
2017. BASIX was mandated for all new housing construction in 2004 in metropolitan Sydney and regional NSW
from 2005. The scheme applies through a framework established in the Environmental Planning and
Assessment Regulation 2000 and implemented through State Environmental Planning Policy (Building
Sustainability Index: BASIX) 2004. Commitments are identified planning stage and compliance with BASIX
obligations is verified at the completion stage. The current target for energy is 40% reduction of the energy
consumption of an average residential dwelling in 2004.
Action 2.3 propoes to increase the current energy target for low density detached houses by 10% (from 40% to
50%) and to raise the thermal comfort rating from 5.5 to 6 star equivalent. Modelling carried out for OEH has
found the current proposal will deliver a benefit of $2.04 for every dollar spent and a payback of capital costs
within 5 years.
The Plan suggests that there remains a split incentive issue for home owners as ‘property developers’ are not
the intended occupiers of these homes. This is a false representation of the new home buyer market and also
a misrepresentation of reality that current NSW regulations that new homes have been required to meet since
2004 in NSW to overcome this issue. There is no split incentive where the customer chooses the home design
and can work with their builder to either meet or exceed current regulations. The introduction of mandatory
requirements has addressed the perceived market failure and all new homes must and do meet the current
minimum requirements. This offers the home owner a level of performance which has been considered
appropriate for over a decade.
The proposed change was part of changes to BASIX proposed in 2013. Those changes also involved an increase
in the water saving target to 50%. It is understood that the Government does not intend to make any change
to the water target at this time. The 2013 BASIX target review was supported by a cost benefit analysis
prepared by Allen Consulting Group. The cost benefit analysis found the increases in energy and water targets
would have a positive impact (cost benefit ratio of 1.64).
In a submission on the 2013 proposal, HIA objected to the increase in BASIX targets due to the increased
compliance costs that would eventuate and the impact of those costs on housing affordability. The accuracy of
Page 3 of 5 | Future Environment Funding Package
the Government’s cost benefit analysis prepared to support the changes was also identified to be a major
concern with the predicted compliance costs found to be severely underestimated. HIA found that taking into
account various assumptions and errors in the analysis have found the cost benefit ratio to be closer to 0.71.
HIA was not alone in voicing concern about the proposed increases with similar concerns being raised by a
number of other associations representing the development and construction industry.
HIA is aware that the current proposal is supported by further cost benefit analysis undertaken by Energeia on
behalf of OEH has found the costs associated with predicted compliance costs of around $500 (thermal
comfort) and $106 (energy savings). The Department of Planning and Environment has identified that the
additional compliance costs connected with the proposed increase in the BASIX target for new housing
construction is estimated to be about $606 per dwelling. The weighted average between dwellings and multistorey apartments is expected to be about $767. HIA understands that the Government has relied upon an
updated cost benefit analysis (Energeia) prepared on behalf of OEH. The updated modelling has found the
NSW economy will be better off by $2.04 for every $1 spent. HIA has been unable to undertake a review of the
updated cost-benefit analysis as this has not been provided to stakeholders during the consultation. However,
clearly the cost benefit assessment does not bear out that home buyers will realise any savings from the
increased construction costs. The extrapolation of the benefits over the whole community when only some in
the community, being new home buyers, will pay through higher home prices is unreasonable.
HIA has discussed the proposed BASIX target increase with members and found the likely compliance costs to
be between $3,500 and $10,000 for most builders. This will comprise the extra cost of items such as higher
standard roof and wall insulation, sarking and double glazing. There will be some home builders that would
not be able to meet the higher BASIX targets without an additional $20,000 to $40,000 of costs. HIA is
concerned that the proposal does not provide adequate education and technical advice to builders and
consumers to inform them on how compliance can be achieved at reasonable cost.
A significant factor that determines the ease of BASIX compliance is site orientation. Sites with a north-south
orientation are disadvantaged in terms of finding a design-based solution. The only options available to
meeting the higher BASIX target would be through products (insulation and window glazing) and appliances.
Also expressing the costs in terms of a payback period of 30 years (life of a mortgage) is unhelpful as a majority
of homeowners move house within a 7-10 year period and would generally not be interested in a 30 year
payback period.
It is HIA’s view that the Government should undertake a public education campaign to inform consumers on
the impact of the BASIX target review so that is it not left to builders to tell consumers at point of sale. If there
is strong public support for the increase in BASIX targets the increased environmental standards will be
demand driven rather than a burden imposed onto the consumer through Government regulation.
The information provided in 2013 also indicated that there was voluntary over compliance, which again
suggests there is not market failure and no split incentive for the new home buyer market in relation to BASIX.
Future Target Reviews
The Paper seeks public comment on a proposal to establish a process for future reviews of BASIX targets and
keeping BASIX standards up to date. The Government is seeking feedback on how to best improve BASIX,
including the process for future reviews of the target. HIA has called on the Federal government to etsbliahs a
clear policy target for the building industry, which would allow the sector to determine the appropriate level of
performance that new homes should offer in relation to their energy performance and the most cost effecitiev
method to achieve this. It is not appropriate for regulations to simply be ‘increased over time’ because they
Page 4 of 5 | Future Environment Funding Package
can. The role of regulation is to address market failure and offer outcomes that can directly address this.
Therefore HIA does not support any proposal for regular reviews or increases in BASIX targets in the absence
of a specific outcome .
All increases in these types of regulation come at additional cost to the homeowner. It is reasonable to assume
that there will be some decline in costs as a range of new technologies are introduced and industries have
sufficient time to plan ahead and source new products capable of achieving higher performance standards.
However there will be some builders and homebuyers who may not be able to achieve a higher target except
at considerable expense in the short term. In those circumstances it may be desirable for the Government to
offer one-off subsidies to First Home buyers and low income buyers to offset the costs of meeting higher
compliance costs associated with the next increase to the BASIX targets.
As an alternative to further mandatory increases in the BASIX target, HIA supports voluntary environmental
sustainability education programs such as HIA’s GreenSmart program which offers practical and affordable
environmental solutions for residential design and construction that exceed current regulations. Operating as
a National program where builders and designers can develop new skills and greens credentials, the
GreenSmart program gives builders a unique qualification that they can point to when customers are looking
for an environmental home design. The success of HIA’s GreenSmart program indicates the value of voluntary
programs that provide incentives for higher environmental performance instead of mandatory regulation that
involves punitive means to achieve a higher standard.
4.0
CONCLUSION
HIA recognises the role of the NSW Government’s Climate Change Framework and Strategic Plan. Based on
the Actions outlined in the Plan, HIA remains concerned with the impact that increasing the BASIX energy and
thermal comfort targets from 40 to 50 will have upon new home construction and hence housing affordability.
The simplistic view that standards can increase so they should, and that a broader community benefit is
sufficient to justify the upfront costs that will be borne only by new home buyers in NSW is not considered
sufficient justification for this increase.
Low income families and first home buyers will feel this change most severely. The apparent level of overcompliance with the current BASIX targets suggests that where money is not a factor households will invest in
the design and construction of their homes to achieve a more energy efficient outcome to save money in
energy bills. Additional regulation is therefore not necessary. However it is those unable to afford the
investment in higher quality products and fittings who will be hardest hit by this proposal. For this reason, HIA
recommends the Government reconsider the proposal so to minimise the hardship it will cause to homebuyers
in terms of housing affordability.
Page 5 of 5 | Future Environment Funding Package