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April 03, 2023
Hugh Parsons

Lessons from overseas retrofit schemes and the potential impact to the New Zealand economy

Our work for BRANZ highlights the potential for economic and well-being benefits

It is no secret that many homes in Aotearoa New Zealand are not warm enough, and use too much energy to heat to healthy and comfortable levels. Last year we released a report that detailed the extent of the problem. Inefficient energy use increases greenhouse gases emitted per household, and makes it harder for Aotearoa New Zealand to meet its emissions reduction targets. Issues such as mould and dampness also cause a multitude of health and well-being problems for occupants of these houses, and some households may choose not to heat their house at all to save money. 

BERL was commissioned by the Building Research Association of New Zealand (BRANZ) to investigate what other countries are doing to combat similar housing issues. The review involved a dive into the literature on overseas schemes. It also included discussions with experts involved with these overseas programmes.

Our review concluded that an ambitious, deep, and meaningful retrofit programme for existing homes in our most deprived communities would have a positive impact in terms of energy savings, well-being benefits, and cost-effectiveness. Key lessons included: 

  • Retrofits must be affordable and low risk for households, homeowners, and organisations 
  • The programme must be simple and trusted
  • The programme must be robust to changes in government and government policy
  • A pilot programme would add considerable value by providing insights specific to Aoteaora New Zealand and its communities.

Ireland operates the most ambitious programme, which targets the majority of poorly performing homes. Due to similarities in terms of population, housing type, and climate, what is happening in Ireland could also be replicated in Aotearoa New Zealand. Whether the investment required comes from government and/or private sources, the shock to the economy will be significant as hundreds of thousands of homes are upgraded. 

To estimate what the economic shock to Aotearoa New Zealand’s economy might look like, we estimated the potential investment that would be required to target around 400,000 homes. We then modelled how Aotearoa New Zealand’s economy might react to a sustained investment in residential construction, using our Computerised General Equilibrium (CGE) model. The results were surprising. 

Our CGE modelling found that a significant investment into residential construction, between $27 and $58 billion, spread over the next 30 years, would: 

  • Reduce exports as residential construction is a purely domestic industry 
  • Decrease overall Gross Domestic Product (GDP) due to this reduction in exports
  • Increase household incomes due to the increased demand for higher paying, higher skilled construction-related jobs.

We also estimated what the benefits would be to households, in terms of energy savings, health, and well-being, if the retrofits were at least as effective as existing programmes such as Warmer Kiwi Homes and the Healthy Homes Initiative. At the lowest level of investment, and considering the number of homes targeted, the benefits to households would likely exceed $115 billion. 

Access our full report