Warming to green mortgages

Generations of homes have been built that are simply unsuitable for the New Zealand climate. 

" The long-term economics of warm, dry and sustainably built homes are undeniable.”

According to research by the Building Research Association of New Zealand, about half our houses aren’t adequately insulated (47 per cent), have insufficient heating (46 per cent) and are damp with visible signs of mould (49 per cent).

Both the International Energy Agency and the OECD have found New Zealand’s Building Code – the minimum legal standard to which homes have to be built – to be below the standards required in many other countries.

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The result is homes that are expensive to heat and which can cause serious long-term health effects for those living in them – particularly children.

According to health statistics, 20 New Zealand children are dying every year, while another 30,000 are hospitalised, from issues related to poor housing.

The number of Kiwi kids being diagnosed with bronchiectasis, a potentially fatal disease associated with repeated chest infections in early childhood, doubled between 2000 and 2015. The damage of these illnesses can stay with a child for life.

Both the incumbent and previous governments have worked to lift the minimum standards of insulation and heating in our 600,000 rental houses throughout the country.

Unfortunately, the reality for many people building or renovating a home is the additional cost of building or renovating to a high standard of dryness, warmth and sustainability puts people off.

Warm, dry, costly?

ANZ recently commissioned research about the motivations and perceptions of more than 500 Kiwi homeowners, including 300 planning to build or renovate in the next two years.

While 37 per cent of people rated a warm, dry home as the most important factor when building or renovating, and 76 per cent wanted to reduce their environmental impact, 78 per cent said cost was the main impediment to them building sustainably.

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This is consistent with research around the world. The cost factor is possibly higher in New Zealand where the cost of new builds is comparatively high. Some industry players report it costs up to 40 per cent more to build in New Zealand than Australia, for example.

However, the long-term economics of warm, dry and sustainably built homes are undeniable.

Lifting the standard

Independent accreditation tool Homestar measures how warm, healthy and sustainable homes are on a scale of 6 to 10. Most existing New Zealand homes only achieve a 2 or 3 rating and new homes – even though they’re built to the Building Code - will only achieve 3 or 4.

The New Zealand Green Building Council (NZGBC) estimates it costs about 1.5 per cent extra to build your average 6 Homestar house compared with a similar house built to the Building Code - but that house will be about a third more energy efficient.

This means the average 6 Homestar home will save about $NZ500 a year in power bills – and will also be warmer, dryer and better ventilated. This leads to lower mortality, fewer medical costs and medical visits for circulatory and respiratory illnesses with fewer days off work and school.

Along with Governments and local authorities around the world, banks have also been working to encourage both corporates and home owners to invest in healthier and more sustainable homes.

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ANZ does a lot of work with the capital markets, linking company’s sustainable ambitions with investors who want to fund these initiatives. Last week, it was announced ANZ is the joint leader of Housing New Zealand’s $NZ500 million Sustainability Bond to help fund investment in sustainable social housing.

At an individual home owner level, green mortgages - where special interest rates are offered to building projects that meet high health and sustainability standards - are starting to gain momentum.

Last year, 37 European banks joined an EU-backed pilot program to create a set of standards around what they call “energy efficient mortgages”.

In New Zealand, green mortgages are very much a niche product. As New Zealand’s largest home lender, ANZ understands we can position green mortgages for more active consideration by home builders and renovators.

We’re in contact with our customers at pivotal times in the life of a house - when it’s built, purchased or refinanced - and so we are in a good position to influence financial decisions relating to the quality of that house.

Every dollar counts

Last year, ANZ offered interest-free home loan top-ups for customers so they can insulate their homes. Now ANZ has launched a Healthy Home Loan Package that includes discounts off standard home loan rates, as well as fee waivers across a range of accounts, for customers buying, building or renovating a home to 6 Homestar or above.

In addition to the health benefits, people with more energy efficient homes have more disposable income because they’re paying less in power bills. For example, in a US study of 71,000 homes, people living in energy efficient homes were 32 per cent less likely to have to default on the mortgage repayments.

When every dollar counts, a lower home loan rate might swing the decision to go the extra mile on health and sustainability.

As Andrew Eagles, Chief Executive of NZGBC, says: “when you get the power of finance and knowledge coming together, then we can drive real change, live healthier lives and help New Zealanders have a lower carbon future.”

Antonia Watson is Managing Director for Retail and Business Banking at ANZ NZ