Cost of better-insulated homes low compared to power bill savings: report

Wednesday, 7 May 2025

New Zealand is still allowing power-hungry homes to be built.

Building thermally compromised buildings is costing the country by locking households into higher-than necessary power bills for decades.

Research from Infometrics, paid for by the Green Building Council, suggests the upfront cost of building better-insulated homes is outweighed by energy cost savings over the lifetime of those buildings.

Economist Brad Olsen, chief executive of Infometrics, said homeowners could expect to recoup the higher cost of building an energy-efficient home in just two to three years through lower interest and energy bills.

Over a 30-year period, designed to coincide with the length of a typical new mortgage, owners of Homestar 6-rated homes could save $62,000 in electricity and mortgage interest.

That was based on homeowners getting lower lending rates, with Infometrics using ANZ’s discounted Healthy Homes Loan, which comes with 0.7% knocked off ANZ’s usual fixed rate loan interest rates, and 1% off its floating rate loans.

The research is released to coincide with the Green Building Council’s one-day Housing Summit in Auckland on Wednesday. Green Building Council runs the Homestar rating system.

Minister of climate change Simon Watts told an audience that the targets set by the Paris agreement were 'More for big countries like China and Russia'.

Building and certifying to a Homestar 6 standard house cost 0.8% more than the Building Code minimum for standalone dwellings, Olsen said, and 0.7% for terraced dwellings, based on the average of building costs in Auckland, Wellington and Christchurch.

Dwellings built to Homestar 6 standard are estimated to use at least 1100 fewer kWh of electricity per year than a Building Code minimum dwelling, which is a saving of at least $296 in electricity per year, Infometrics said. By 2050, forecast electricity price rises could mean that savings increase to at least $580 per year.

Olsen said: “More diligent households could choose to put their interest and electricity savings towards their mortgage in order to become mortgage free earlier.

“Following this strategy, households would pay the same as they would have without Homestar, becoming mortgage free at least two years earlier, or one year earlier for a terraced house.”

“This report confirms what we’ve long known; building better homes is a win for healthier New Zealanders, the planet, and now, are clearly more affordable in the long run,” said Andrew Eagles, chief executive of the Green Building Council.

He called on banks, which are trying to reduce the carbon footprints of their loan books, to do more to ensure they are financing the building of energy efficient homes.

Olsen found that currently, only ANZ was offering an interest rate discount for Homestar dwellings, which would limit uptake of Homestar.

Despite the clear advantages, the availability of sustainability-linked mortgages remained limited, Eagles said.

Andrew Eagles chief executive of the NZ Green Building Council says, “With the right support from banks and government, we can make these homes the norm, not the exception”.

However, BNZ, Westpac, ASB and Kiwibank offered discounted development finance for certified Homestar developments, Olsen found.

The construction and operation of homes is estimated to account for 10% of New Zealand’s total carbon footprint, Olsen said, referring to estimates from 2021.

“This means that reducing the carbon footprint of homes could make a meaningful difference to New Zealand’s emissions and contribution to climate change,” Olsen found.

A number of banks also offered house mortgage top-ups with favourable rates for sustainability upgrades such as insulation and efficient heating, Olsen reported.