We've partnered with Generate Zero to measure and reduce emissions from our 8,000+ residential rental properties across the motu.
One of the biggest challenges we see is incentivising landlords to invest in their properties to make them more energy efficient. There is little incentive to do so, although some banks offer low-interest loans for energy-efficient projects. With growing emphasis on reducing carbon emissions and enhancing energy efficiency in residential housing, our industry must contribute and play its part.
An
idea could be linking tax incentives for landlords to an Energy Performance Certification (EPC) regime. New Zealand could
create a robust framework that encourages landlords to improve the
energy efficiency of their properties, reducing the nation's carbon
footprint and providing financial benefits to landlords and tenants.
EPCs are currently not used in New Zealand but are widely used in
Europe. I have previously argued that they should be introduced to
New Zealand and replace the ill-thought-out and flawed Healthy Homes
legislation.
The
EPC is a grading system valid for ten years with an energy efficiency
rating from A (most efficient) to G (least efficient). This system
would involve a tiered tax incentive approach. Properties with an EPC
rating of B or better would allow landlords to offset 100% of their
interest payments against their rental income. This would strongly
incentivise landlords to invest in significant upgrades like
insulation, double glazing, and energy-efficient heating systems.
Properties
with a C to D rating would allow landlords to offset 50% of their
interest payments, encouraging them to make moderate improvements.
Finally, properties with an E rating or lower would receive no tax
relief, thus pushing landlords to improve the least energy-efficient
homes.
The
importance of reducing emissions from residential rental housing
cannot be overstated. Research on our rent roll estimates that the
average rental property emits approximately 7.8 tons of tCO2e
annually. To offset these emissions entirely through tree planting,
approximately 18 native trees would need to be planted each month for
every rental property.
While planting trees offers a long-term solution, more is required.
Combining tree planting with energy efficiency improvements can
provide a holistic approach to reducing emissions. This approach
would also align with global trends. Countries like Germany and the
United Kingdom have successfully implemented similar policies, using
tax incentives to encourage energy efficiency in housing. Germany,
for example, offers tax relief for energy-efficient renovations,
while the UK provides VAT relief for installing energy-saving
materials. These policies have been instrumental in driving down
carbon emissions and creating more sustainable housing markets.
Beyond
reducing emissions, improving energy efficiency offers numerous
benefits. Tenants benefit from lower energy bills and healthier
living conditions, while landlords enjoy higher property values and
increased demand for their rentals. Moreover, as sustainability
becomes a key consideration for tenants, energy-efficient properties
will become more desirable in the rental market.
This
tax policy would also support New Zealand's broader climate goals.
The government has committed to achieving net-zero carbon emissions
by 2050, and housing plays a crucial role in meeting this target.
This policy could significantly contribute to the nation's efforts to
combat climate change by incentivising landlords to improve energy
efficiency.
An
EPC-linked tax incentive scheme for landlords could revolutionise New
Zealand's rental market. By promoting energy efficiency, reducing
emissions, and providing financial benefits, this policy would not
only benefit landlords and tenants but also contribute to New
Zealand's climate goals. Whether through energy upgrades or tree
planting, landlords have a unique opportunity to positively impact
the environment while enhancing the value and appeal of their
properties.
