A financing model that allows homeowners to pay for home energy upgrades through a charge linked to their property could generate an additional $14.34 billion in spending on home energy improvements over three years, according to new Monash University research.
Currently, high upfront costs and uncertainty about whether they'll recover their investment can discourage Australians from making home energy upgrades, such as installing solar panels and insulation.
A survey of 2239 Australians explored attitudes towards Property Linked Finance (PLF), which allows homeowners to finance energy upgrades through a charge linked to their property. If they sell, the remaining repayments can transfer to the new owner.
When presented with the concept of PLF, about 60 per cent of new home buyers and 50 per cent of landlords found it appealing. Thirty-five per cent of new-home buyers, 32 per cent of owner-occupiers and 36 per cent of landlords said it would allow them to fund improvements they couldn't otherwise afford upfront.
Lead author Dr Fernanda Mata, from BehaviourWorks Australia within Monash University's Faculty of Business and Economics, said upfront costs are one of the biggest challenges for households making energy improvements.
"Even when upgrades could reduce energy bills over time, finding the money to pay for them can be difficult. Many households are already managing high living costs and may have limited capacity to take on additional debt even when they can see the clear long-term benefit," Dr Mata said.
"One of the benefits of PLF is that the repayments stay with the property if you sell it. This means homeowners only pay while they own the property and benefit from the improvements, rather than having to pay off the full cost when they move.
"Repayments can also be spread over a longer period, ideally aligned with the lifespan of the improvements, helping households manage the costs over time."
Market simulations suggested that PLF could increase both uptake and spending on home energy improvements. Among owner-occupiers and landlords already considering energy upgrades, simulated uptake rose from 51 per cent to 72 per cent and from 52 per cent to 74 per cent, respectively. Among new-home buyers, simulated uptake rose from 75 per cent to 88 per cent.
The study also found that 44 per cent of owner-occupiers, 41 per cent of landlords and 64 per cent of renters were not currently considering home energy improvements, highlighting the challenge of encouraging wider uptake.
For rental properties, landlords could use PLF to fund upgrades, with the option of sharing some of the costs with tenants.
Almost two-thirds of landlords said tenant contributions would make it easier to meet energy-efficiency standards.
Renters were also open to contributing, with 37 per cent saying they would agree to
pay a PLF charge for specific upgrades they wanted.
A key consideration for renters was whether what they were asked to contribute was justified by the benefits they received, including lower energy costs and improved comfort.
"Our findings suggest that splitting the PLF costs 50/50 between landlords and tenants could work for both groups, as long as tenants save more on their energy bills than they pay towards the upgrades," Dr Mata said.
Professor Liam Smith, from BehaviourWorks Australia within the Faculty of Business and Economics, said innovative financing models could play an important role in accelerating Australia's transition to more energy efficient homes.
"Improving the energy efficiency of Australian homes is an important part of reducing emissions and building a more sustainable future," Professor Smith said.
"But achieving change at scale requires more than just the right technologies. We also need to rethink how households can access and pay for these improvements."
BACKGROUND
The research was conducted by BehaviourWorks Australia at Monash University, in partnership with PLF Accelerator, with funding support from RACE for 2030.
Home energy improvements could include solar panels, efficient electric heating and cooling, insulation, double-glazed windows and heat pump hot water systems.
Similar finance models to PLF have been operating in parts of the United States and Canada for more than a decade, while Scotland is exploring the introduction of this model.
In parts of Australia, a similar approach is already used to finance improvements to commercial buildings through Environmental Upgrade Agreements. This research explored how PLF could also work for Australian homes.
