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Lets get serious about Insulation

Sunday, August 26, 2012

Prime Minister John Key is in the papers today foreshadowing possible government "regulations and/or incentives" for private landlords to insulate residental rental properties.


Number of Insulated Rental Homes Alarming

The Warm Up New Zealand scheme has been operating since 2009 and provides a 33% subsidy/up to $1,300 for insulating houses built before 2000.  60% subsidy is available for Community Services Cardholders or their landlords.  The New Zealand Herald quotes an alarming figure of the number of rental properties that are still uninsulated:

Of the 230,000 houses insulated with a Warm Up New Zaland subsidy, just 25,000 have been rentals. That's only 5 per cent of the country's rental stock - leaving an estimated 1,000,000 rental properties uninsulated.
 

Landlords Are Being Discriminated Against

APIA member Peter Lewis describes to the Herald the difficult process he had to go through to get one Manurewa rental property insulated.  One particular insulation provider would not offer the 60% subsidy to Peter even though the occupying tenant has a Community Services Card.  Alarmingly, this particular provider has refuses to offer 60% subsidy for rental properties, 

"We think that landlords will use the tenant to get a 60 per cent subsidy, and after the work has been done throw the tenant out and go and live in the house themselves," the contractor explained. "So we won't let that happen."

Cynical much?

We are not aware that installation providers have the regulatory power to lessen a landlord's entitlement to government subsidy based on uninformed assumption of the latter's motives. 

APIA landlords own on average 3 properties on top of their own homes.  Most of our members do not live in the same parts of Auckland as their tenants.  To suggest that landlords would uproot their families and relocate to their rental properties once they have secured with 60% subsidy is simply absurd. 

It is also worth pointing out that by withholding the 60% subsidy, insulation providers are simply driving landlords more towards not insulating rental properties.  Sometimes good intentions meet unintended consequences.  What might have started off as staunch tenant advocacy can only end in tears.  More specifically, tenants' tears.  What is the good of refusing the higher subsidy when the logical and economically minded landlord would simply not insulate in the first place?! 

Unfortunately for us, Peter has been too kind to name names.  To this particular provider, if you are reading, we invite you to attend some of our meetings to meet our members.  Not only will you find that we are a far cry from Shakespeare's Shylock, you might even pick up a client or two. 
 

Comprehensive Insulation Scheme Needs Serious Rethink

Speaking of the 60% subsidy, we believe that if the government is serious about insulating Kiwi homes then
  1. landlords must be given access to a government subsidy that is over 33%;
  2. the government must investigate allegation of price-gouging by insulation providers and have prices standardised across the board; and
  3. a mechanism be set up making DIY installation possible, the risk of sub-standard insulation can be ameliorated by regulated third-party audits as suggested by Geoff Hall.
As David rightly points out, Auckland rentals are in such popular demand, houses do not need insulation in order to attract tenants.  It goes without saying that providing tenants with a healthy warm home only secures landlords' stable financial returns for their investments.  However, this has to be balanced against the mounting costs landlords are facing and the pressure to keep rental properties economically viable. For there to be comprehensive insulation across the board, the numbers must work in property owners' favours. 


Have you insulated your rental properties?  How have you found the experience?  Leave a comment below.

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I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

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