How low-income households are affected disproportionately by energy rates, and how access to finance can allow them to invest into the energy efficiency of their homes.
Project summary
Despite the introduction of sustainability standards for the construction of new homes, there still exist millions of homes in Australia that aren’t subject to improvements in energy efficiency, with almost four times as many home loans being issued to existing homes as new ones. As energy prices increase, those that already can’t afford to invest in the energy efficiency of their homes are subject to a ‘net zero poverty premium’.
Research from the Institute for Sustainable Futures (ISF) has explored the potential for regulatory ‘nudges’ to allow for low income earning households to access loan extensions and deferrals for the purpose of green retrofitting their homes. ISF proposes that regulatory bodies build a Green Retrofit Finance Housing Model to test the effectiveness of these extensions on credit risk.
The study highlighted the ways in which, with support from regulatory bodies, green retrofits have the potential to simultaneously reduce household cost for homeowners, as well as improve the credit risk of those homes for banks. Improving the energy efficiency of homes could lead to significant savings and reduce greenhouse gas emissions. Cost savings improves the serviceability ratio for banks as well as increasing property values, contributing to improving a bank’s credit risk through the loan to valuation ratio.
While these opportunities require regulatory action to be effective, they have the potential to enable more sustainable housing at scale and support a just transition to renewable energy. They provide a way to mitigate the impact of the rising cost of energy on people more vulnerable to it.
Read more about the project here or the report here
Project timeframe
2023
SDG targets addressed by this project
No poverty:
1.5 – By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters.
Affordable and clean energy:
7.1 - By 2030, enhance international cooperation to facilitate access to clean energy research and technology, including renewable energy, energy efficiency and advanced and cleaner fossil-fuel technology, and promote investment in energy infrastructure and clean energy technology.
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Research Director - ISF -
Program Lead - Business, Economy And Governance
