Starting in October 2025, minimum energy efficiency standards will be enforced in rental homes. The Victorian Government announced these proposed changes in June under the leadership of the Allen Government. The regulations will address several key areas, including:

- Ceiling insulation

- Draught proofing

- Hot water efficiency

- Cooling systems

Rental providers will be required to install ceiling insulation where it doesn't exist, fit 4-star showerheads in all showers, secure blind cords, and ensure windows and doors are properly draught-proofed before entering into new rental agreements.

Additionally, heating, cooling, and hot water systems must be upgraded to energy-efficient models once they reach their end-of-life. The new rules impose a minimum 3-star cooling ratin for systems in the main living area of rental homes.

Impact on Rental Providers and Tenants

During the initial announcement, Energy Minister Lily D'Ambrosio estimated that a full range of upgrades would cost rental providers about $5,000, while renters could potentially save $567 per year on energy bills due to improved efficiency.

While First National Real Estate acknowledges the importance of energy efficiency in reducing greenhouse gas emissions and improving living conditions for renters, the changes come at a time when Victoria is facing a severe housing affordability crisis. Many rental providers are already under pressure from increasing costs, including land tax, council rates, rising interest rates, and insurance premiums.

As a result, some landlords are selling their investment properties, with many being bought by First Home Buyers (FHBs). This trend has led to a reduction in the supply of rental properties, exacerbating the crisis.

According to projections, approximately 280,000 renters could see an increase of $3,400 per year (or about $65 per week) due to the new standards, further burdening tenants.

Call for Government Action

First National is concerned that more property investors may exit the Victorian rental market due to these proposed changes, leading to higher rents for the remaining properties. This could intensify the already tight rental market, making housing even less affordable for renters.

The First National Network is urging the Victorian Government to consider postponing the introduction of the new standards until the supply and demand for rental properties are more balanced. They are also advocating for subsidies and incentives to help rental providers offset the costs, ensuring these additional expenses aren't passed directly onto renters.