Wellington Property Investors' Association

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10-04-2016

Adding insulation not cost effective

Over the last month or so, the NZPIF has attended workshops on the Residential Tenancies Amendment Act, more commonly known as "Minimum Standards for Rental Properties". We have also made  two written submissions and attended a select committee hearing on the Bill.

During this process, government officials and MP's have been subjected to a high level of pressure from other groups that would like to see even higher standards than those put forward in the Bill.

These calls mainly came from organisations involved in selling or installing insulation, but they also came from groups that advocate for higher housing standards, such as Beacon Pathway, plus groups such as the Children's Commission and the Otago Medical School. Some of these organisations would have an obvious financial benefit from higher levels of insulation.

An advantage of attending the Select Committee hearings is that they are a public forum, so you can listen to other submitters and get an idea of the Select Committees view of their arguments.

While some organisations are still advocating for a full rental property WOF, most submitters are looking for higher insulation levels for rentals that already have insulation.

The Bill proposes that rental properties with existing insulation must be at the 1978 regulation levels, which are about a third less than current standards. Those who would like higher insulation levels say that the current insulation standards have been applied for good reason and therefore this should be the minimum standard for all rental properties, whether they are already insulated or not. While this is a valid argument, it doesn't look at the increased benefit of the insulation or the cost.

The NZPIF submitted the graph below from a study into insulation levels. The study showed that the vast majority of insulation benefit was at the 1978 level of around R2. While current standards have levels of insulation that are 50% higher than the 1978 levels, there is only a 2.5% increase in efficiency.

Unfortunately the cost of topping up insulation from the 1978 levels is almost the same as completely installing new insulation. It just isn't worth the high cost to achieve a modest improvement in efficiency.

We made this point very clear and it seemed to strike a chord with the MP's on the Select Committee. They asked an insulation installer who had previously made a submission what the cost of topping up the insulation to current standards would be. His answer was between $2,500 and $3,000.

The Select Committee put this to an industry expert and asked if he thought this backed up the NZPIF submission that increasing existing insulation to current levels would not be cost effective and would put upward pressure on rental prices. The expert tried, but couldn't really deny this.

So we are hopeful that common sense will prevail and the Select Committee will recommend to parliament that the 1978 insulation standards detailed in the Bill should remain. There is no doubt that this level of insulation will provide an excellent level of comfort for tenants without seeing their rental prices increase.

The Select Committee are due to release their findings in a report to Parliament on 8 June. This leaves very little time before the Act comes into force on 1 July 2016. We will keep members updated with any decisions.

 

 

Tags: federation reports

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