What is a 7-star house, and are they worth more?

An agreement by all the Australian states and territories to make new homes reach a 7-star target has been celebrated by some and criticised by others. So what is all the fuss about?

What exactly is a 7-star house?

A 7-star house is one that has a much higher level of energy efficiency than the 6-star mandatory standard for new homes that came into operation in 2010.

It involves the inclusion of fixed appliances like heating, cooling, hot water and lighting and being ready for the use of solar panels to harness sunshine for electricity and for charging electric vehicles. It will also demand climate-resistant features like better insulation, condensation mitigation, higher quality glazing and smarter floor plans.

Another aspect that most states have backed – with the exception of NSW – is to add into that updated National Construction Code (NCC) a requirement for new homes to be more accessible for people with disabilities, with ramp access, wider corridors for wheelchairs and wall-reinforcing in the bathroom and toilet to make installation of future grabrails easier.

When do these rules come in?

There’ll be a 12-month transition for the new energy efficiency standards to come into effect, so they’ll come into force in May 2023 and all new homes will have to comply by October 2023. Renovations will also have to reach a 7-star rating.

This will effectively raise the bar for the more than 5.5 million houses that are predicted to be built between 2023 and 2050, and will help us catch up with international best practice in places like Europe and California.

Whether or not houses will also need accessibility factored in depends on where you live, with NSW saying it is holding off for now.

How much extra will this cost me?

That all depends, says sustainable housing advocate Rob McLeod of the influential national organisation Renew that had been advocating for these better environmental rules.

“What it will cost to change from building a 6-star home to one that’s 7 stars depends on what you’re doing to increase energy efficiency and on what materials you’re using because there’s a lot of different strategies,” McLeod says. “Sometimes, there’s literally no cost.

“But at other times, it’s expected it will add $1000 to $2000 onto the cost of building a detached house and $500 for each apartment in a block. To update them later would cost much more. Compared to building a 2 or 3-star house – which is what most of our existing homes that have been built in the past are – one 2018 study found it would cost around 10 per cent more.”

More recent reports, says CEO of the Green Building Council of Australia Davina Rooney, show it could be even cheaper. “The regulatory modelling shows that this can be achieved on average at under $2500 per house,” she says. “This is research from the Domain Sustainability in Property Report, issued last year.”

It’s hoped that the 7-star mandatory standard will quickly become viewed as the ‘new normal’, with, for instance, all the houses on last year’s season of the TV renovations show The Block being 7-star.

Many new home builders are expected simply to add the extra cost to their mortgage, while banks are often offering lower mortgage rates for new green homes.

What’s the upside?

A number of studies have shown the extra cost of a 7-star house will be far outweighed by the money saved on its energy efficiencies. With energy costs and power bills expected to increase into the future, and 25 per cent less energy needed to heat or cool a home, those savings are likely to escalate.

Rooney says that Domain modelling shows savings will lead to a huge 30 per cent return on the investment.

The savings will be felt instantly too, advises McLeod. “You’ll come out ahead after just 30 days,” he says. “We calculated how much extra you’d be paying on that cost added to your mortgage at an elevated 5 per cent interest rate and the savings would still be more than that.”

But as well as paying much less to heat and cool your home, you’ll end up with a much more comfortable home that, in addition, of course, is contributing to emissions reduction at a time when Australian homes are responsible for 12 per cent of emissions nationally and use 24 per cent of electricity generated.

It’s estimated that the lift in the minimum Nationwide House Energy Rating Scheme (NatHERS) from 6 to 7 stars will result in a cut of emissions by up to 78 million tonnes by 2050, will lower the cost of grid upgrades by up to $12.6 billion by 2050 and lead to far fewer deaths as a result of extremes in weather.

Will my greener home be worth more?

Absolutely! It’s believed that in the future, poorly built and under-performing homes will be in far less demand, with buyers unwilling to pay as much for them, while they’ll be ready to pay a premium for good, green homes.

Rooney says, “Research shows people are willing to pay up to $125,000 extra for a new home with energy efficiency features, so we would expect these houses to be worth more over time.”

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Does everyone agree?

Yes, and no. After a four-year national consultation led by the Australian Building Codes Board, nearly all the bodies involved with the property industry believe raising the regulatory framework to a 7-star standard is a good thing; they just disagree with some of the details.

Some feel that the requirement for more accessible housing will add a cost that can’t always be justified, and that those standards should be directed more narrowly at those homes likely to accommodate people with disabilities in the future.

At the Property Council of Australia, CEO Ken Morrison says the building industry at the moment is under huge pressure with the dramatically rising costs of building materials and supply disruptions. He wants a three-year transition period to those changes and argues that they should be a consistent standard across all states and territories.

Others believe the changes don’t go far enough, and want more stringent standards up to a net zero NCC, and a national retrofit strategy to improve the energy performance of existing homes.