Property linked finance for housing transformation

Decarbonising existing Australian homes will be essential in meeting our emissions reduction target of 62-70% by 2035 from 2005 levels and net zero by 2050. Residential buildings are responsible for around 24% of overall electricity use and more than 10% total carbon emissions in Australia.

Retrofitting around 8 million Australian homes is a significant task. A number of policy-based and market-based interventions exist to support the roll out of renewable energy and energy efficiency upgrades in homes. 

PLF presents an opportunity to accelerate these residential upgrades across Australia in a sustained manner. PLF is not a new concept – it exists in Australia as Environmental Upgrade Agreements and in the United States as Property Assessed Clean Energy.

The report considers a pathway to further incorporate and scale PLF into Australia’s financial system with targeted recommendations that can be simply enacted.

Recommendations

1. Recognising the importance of harmonisation global standards to financial markets, Australia should support the development of global Property Linked Finance practices by facilitating engagement with the Global Property Linked Finance Initiative, including at COP31. This would establish a pathway to access global financial markets to finance sustainability retrofits.
2. The Australian Government should review financial system regulatory mechanisms, including by directing ASIC to incorporate PLF into ASIC Regulatory Guide 209 Credit licensing: Responsible lending conduct, and adapt the regulation of low-cost credit contracts to apply to PLF.
3. State and Territory Governments should review existing EUA legislation to remove the requirement for councils to opt in individually, and to enable centralised or accredited third-party administration of PLF programs. This will reduce transaction costs and enable national scale.
4. The Australian Government should catalyse investment in 100,000 new zero-net carbon homes with the objective of driving down costs of sustainability retrofits.
5. The Australian Government should coordinate with industry, education, and finance sectors to ensure a skilled workforce and stable supply chains for retrofit delivery, supported by predictable long-term demand signals created by PLF.