Beginning October 2025, minimum energy efficiency standards will be legally enforced across rental properties in Victoria. These significant regulatory changes were announced by the Allen Government in June 2024, as part of the state's commitment to improving housing quality and reducing emissions under its Gas Substitution Roadmap.

The updated Residential Tenancies Regulations will target several key areas in both new and existing rental agreements:

What Will Be Required Under the New Standards?

Rental providers will need to ensure their properties meet updated efficiency benchmarks before entering into a new rental agreement or at the end-of-life of current systems. The required upgrades include:

• Ceiling Insulation: Installation of insulation where none exists.

• Draught-Proofing: Sealing of windows and doors to reduce heat loss.

• Hot Water Efficiency: Upgrading to energy-efficient hot water systems as existing ones reach end-of-life.

• Cooling Systems: A minimum 3-star rated cooling system will be required in the main living area of all rental homes.

• 4-Star Showerheads: All shower fixtures must meet the 4-star water efficiency rating.

• Blind Cord Safety: All blind cords must be properly secured to ensure safety compliance.

These standards will be rolled out in phases but will be mandatory from 30 October 2025 for all new rental agreements and system replacements.

Impact on Rental Providers and Renters

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.