Home upgrades can save renters billions in energy bills
Key Takeaways:
Household energy upgrades could halve renters’ energy bills, delivering AU$107 billion in savings by 2050.
Minimum energy-efficiency standards are a critical lever to enable these benefits, as incentives to landlords alone are not effective.
Complementary incentives and financing mechanisms could ensure renters are financially better off from day one.
Upgrading rental properties could deliver meaningful system-wide benefits by reducing peak electricity demand and/or gas demand.
27 May 2026 (IEEFA Australia): Minimum energy-efficiency standards could form the basis of a plan to halve tenants’ energy bills, saving an estimated $107 billion by 2050, according to a new report released today.
Renters make up over 30% of Australian households yet risk being left out in the cold amid the mass uptake of rooftop solar, batteries and other energy upgrades. This is due to the lack of motivation for landlords to upgrade their rental properties, finds the report, How to halve renters’ energy bills.
The root cause is the “split incentive” problem where landlords have little or nothing to gain from investing in energy efficiency because tenants are responsible for paying the energy bills, says author Jay Gordon, Energy Finance Analyst, Australian Electricity at IEEFA.
After modelling more than 100,000 scenarios across a range of Australian households in each state and territory, Mr Gordon found that the energy bill savings from rental property upgrades would accumulate significantly over time, outweighing the costs to landlords in the long term.
Cost-effective energy-efficiency measures modelled in the report include: installing rooftop solar, upgrading gas or inefficient electric appliances to efficient electric alternatives, insulation and draught-proofing.
“In the vast majority of rented households, a combination of thermal-efficiency upgrades, efficient electric appliances and rooftop solar could be deployed to halve renters’ energy bills, relative to a poorly performing home,” Mr Gordon says. “These upgrades could generate AU$107 billion in real cumulative savings by 2050.”
While owner-occupiers are starting to embrace energy efficiency and the savings it delivers, government incentive schemes targeting landlords have had little impact. Installation rates of solar and insulation in rental properties lag badly, adding significantly to cost of living pressures and health risks for tenants.
“More than 30% of Australian households rent, and are generally locked out of home energy upgrades,” Mr Gordon says. “The split incentive problem is compounded by other challenges, such as the disproportionately high share of renters living in apartments, and the power imbalance between landlords and renters.
“Numerous government initiatives have attempted to increase the energy performance of rental properties via targeted incentive programs or concessional finance schemes, with limited success. This is not surprising as they have focused only on reducing the capital cost of home energy upgrades.”
The report recommends a concerted, co-ordinated approach to setting minimum energy efficiency standards for rental properties. These standards should embed a requirement that gas or inefficient electric appliances be replaced with efficient electric alternatives when they break down. For non-appliance improvements, the standards could provide landlords with flexibility to choose from a variety of upgrades including thermal efficiency improvements, rooftop solar and batteries.
A combination of well-designed financial products, and state and federal incentive schemes could be developed to enable a smooth roll-out of the standards.
“For instance, the federal government should consider introducing incentives to encourage rental property upgrades as part of ongoing tax reforms,” Mr Gordon says. “This could include further restrictions on the eligibility for negative gearing, conditions on the ability to deduct appliance upgrade costs, or the introduction of instant asset write-offs or accelerated depreciation for home energy upgrades.”
The report found that upgrading rental properties could deliver a net present value (NPV) of AU$24.8 billion to 2050, with consistently positive NPVs in each state and territory. If the upfront costs were spread over a 15-year loan at a comparable mortgage interest rate, upgrading rental properties would be cash flow positive from day one.
“Our analysis shows that the long-term savings of the upgrades outweigh the capital costs,” Mr Gordon says. “This means that even if the costs of upgrades were passed on to renters, it is possible for governments to ensure they benefit from day one.”
The benefits of upgrades extend well beyond the rental market, with the energy savings easing the strain on power networks during peak demand periods.
“Upgrading rental properties could also yield system-wide benefits,” Mr Gordon says. “In most regions, the upgrades delivered a net reduction in average-day peak electricity demand in summer and winter, even if some renters increased their electricity consumption following the upgrades.”
“In regions like Victoria where gas appliances are widespread – upgrading rental properties would also deliver material gas savings, helping to free up gas supply for critical industries.”
Read the report: How to halve renters’ energy bills
Media contact: Amy Leiper, ph +61 414 643 446, [email protected]
Author contact: Jay Gordon, [email protected]
About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends, and policies. The Institute's mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. (ieefa.org)
