Proposed changes to the minimum energy efficiency standards for rental properties in Victoria could soon see landlords facing increased costs in a bid to help the state move towards net zero emissions.

While the intentions behind these reforms are commendable, the reality is that these changes will have significant financial implications for landlords, many of whom are already feeling the pinch from rising interest rates and inflation.

But here’s the twist: recent research shows that a whopping 81% of Australians support these measures, with 61% backing a nationwide adoption of similar standards.

So, what’s driving this enthusiasm, and what does it mean for the future of property investment?

A snapshot of the proposed changes

The Victorian Government recently wrapped up public consultations on proposed energy efficiency standards aimed at improving the comfort and living costs for renters while reducing the state’s carbon footprint.

From October 2025, landlords in Victoria could be required to implement a range of energy-saving measures, including:

• ceiling insulation,
• improved door sealing,
• replacement of old hot water and heating systems with energy-efficient alternatives, and
• installation of four-star showerheads and three-star cooling systems in main living areas.

The final standards are expected to be released in October 2024.

Support is strong, but not universal

According to a survey conducted by Green.com.au, 81% of Australians are in favour of these reforms, with renters showing the strongest support—67% want to see these standards adopted nationwide, and another 25% are content with Victoria’s exclusive adoption.

Owner-occupiers aren’t far behind, with 60% supporting a nationwide rollout.

Interestingly, the enthusiasm drops off significantly when it comes to rental providers.

Only about one-third (36%) support the standards in Victoria, and a similar proportion (33%) are open to seeing them implemented nationwide.

This isn’t entirely surprising—landlords are naturally wary of new regulations that come with increased costs, especially in a challenging economic climate.

Generational divide in environmental consciousness

Data from the research also shows a clear generational divide.

Younger Australians, particularly those under 25, are overwhelmingly supportive of the proposed changes, with 93% in favour and 58% wanting them rolled out across the country.

This aligns with broader trends we’ve seen in younger demographics, who tend to prioritize sustainability and environmental issues more than their older counterparts.

But it’s worth noting that many of these young supporters are renters themselves and aren’t directly impacted by the financial burden these changes would impose on landlords.

Support remains robust among older Australians, too—78% of those aged 55-64 and 76% of those aged 65+ are in favour of the measures.

However, as the Green.com.au CEO David Green points out:

“The support from younger generations sends a strong signal to landlords: aligning with these reforms isn’t just about compliance; it’s about meeting the expectations of a new generation of environmentally conscious tenants.”

Support for the proposed standards isn’t confined to Victoria.

In fact, residents in the ACT and WA show the highest levels of approval, with 87% and 85%, respectively, backing the measures.

A significant proportion of respondents in these regions are also pushing for nationwide implementation, reflecting a broader appetite for sustainability across Australia.

Even in Queensland, a state often viewed as less progressive on environmental issues, 82% of respondents are in favour of the reforms.

The investor dilemma

For landlords, the challenge is clear: while these reforms could increase property values and tenant satisfaction in the long run, the upfront costs are substantial.

We’re talking about mandatory installations and upgrades that could run into thousands of dollars per property.

And this comes at a time when many landlords are already stretched thin, facing the dual pressures of rising interest rates and a cooling property market.

Despite these challenges, investor lending has seen remarkable growth.

Recent data from the Australian Bureau of Statistics shows a 30.2% increase in new investor loans in August compared to the same period last year, outpacing owner-occupier growth.

This suggests that while landlords may be apprehensive about new costs, the allure of property investment remains strong.

Final thoughts

The push for energy efficiency in rental properties is part of a broader movement towards sustainability that is gaining traction across Australia.

For landlords, it’s a double-edged sword—on one hand, there’s the potential for increased costs and regulatory headaches; on the other, there’s an opportunity to align with the values of a new generation of renters who prioritize sustainability and could drive demand for greener homes.

The question for property investors is whether the long-term benefits of these reforms—enhanced property values, happier tenants, and contributing to a sustainable future—will outweigh the initial financial outlay.

As the final standards are set to be unveiled in October 2024, landlords will need to weigh these factors carefully as they plan their next steps in an evolving property landscape.

About Leanne Jopson
Leanne is National Director of Property Management at Metropole and a Property Professional in every sense of the word. With 20 years’ experience in real estate, Leanne brings a wealth of knowledge and experience to maximise returns and minimise stress for their clients.