True cost of switching your home to electricity

Mum and dad investors face crushing upfront bills to switch their properties from gas to electricity under strict new rental standard rules.

Mum and dad investors forced to switch properties from gas to electricity under tough new rental standards face upfront bills of at least $30,000, Victoria’s peak business group says.

In a submission to a review of the Allan government’s new rental rules, which include switching from gas to electric hot water and heating systems when appliances reach end of life, the Victorian Chamber of Commerce and Industry says the cost estimate of proposed changes had been undercooked.

It warns that the likely hip pocket hit would eat into mum and dad investors’ savings and risk a further exodus of landlords during a “rental crisis”.

“Frankly, the recommendations impose significant costs on Victorians during a cost-of-living crisis,” VCCI chief executive Paul Guerra says in the submission.

Switching from gas to electric heating systems will financially cripple many mum and dad investors, Victoria’s peak business group warns.

The new minimum standards, which would mostly be introduced next year, require ceiling insulation, 4-star shower heads in all showers, blind cord anchors, and draught-proof windows and doors before a new lease is signed.

Mr Guerra said it was the provisions that would trigger the need to electrify homes – for example when gas appliances were switched to electric models and upgrades to power mains were needed – which were of particular concern.

“The cost estimation of $5519 in 2025 under the revised minimum standard miscalculates the actual costs incurred by investors,” he said.

Converting a three-bedroom home from gas to electricity is expected to cost about $35,000, according to a report.

He pointed to a Frontier Economics report on the cost of converting a three-bedroom house from gas to electricity as being around $35,000, and to a Commonwealth Bank scheme offering customers $30,000 loans to convert properties.

“Even with the true cost of electrification remaining contested, this regulation will undoubtedly impact Victorians’ disposable incomes, slowing the velocity of money and diverting much-needed capital away from areas of the state’s economy which continue to recover following the Covid-19 pandemic and associated lockdowns,” the submission says.

This also risked a further reduction of properties available for rent, a trend that has been exacerbated by law changes and the imposition of new taxes on landlords.

Real Estate Institute of Victoria President Jacob Caine said while he strongly supported improving energy efficiency and safety standards of Victorian rental homes the government must not exacerbate the “immense pressure our rental ecosystem is already under”.

“Private investors remain the backbone of the rental market, and any legislation that triggers additional costs must consider their financial capacity to meet the new standards,” he said.

“If these standards are rolled out as proposed, the financial burden will likely see more owners sell their properties.”

A government spokesman said it was unlikely that all upgrades would be required in a single year and said government estimates continued to price the upgrades a total of $5519 on average.