3 Home Heating Social Drivers
3.1 Introduction
The contract brief called for the identification of drivers behind:
- the choice of home heating type (covered in section 3)
- the uptake of energy efficiency (covered in section 4).
Note that there is some duplication across the tables in sections 3 and 4, since it can be expected that drivers for investing in a change to the type of home heating may also be drivers for investing in improved insulation – although this is not always the case.
In addition to this classification, it is also important to distinguish those drivers that apply to individual choice and behaviour from those drivers that relate specifically to participation in some publicly funded programme (covered in section 5). The other drivers of individual choice do not simply disappear in the presence of a programme, but by its very nature a publicly funded programme is deliberately intended to alter the balance of drivers to the point where individual choices are affected.
Table 3.1 provides a quick overview of the range of drivers that are believed to influence householders' decisions on the type of home heating, and whether or not they wish to change to a less polluting form of home heating and/or a warmer home. Table 3.1 is structured to distinguish whether or not the drivers act to encourage change towards cleaner heating and warmer homes, or inhibit change.
Table 3.1: Drivers behind choice of home heating
View drivers behind choice of home heating (large table).
3.2 Influences within the individual's immediate, day-to-day circumstances
Encouraging drivers
(1) Relatively low residential electricity tariffs
Relatively low residential electricity tariffs have been a significant driver in the past, and, despite recent increases are still encouraging conversions to electrical clean-heat options among a number of segments of the market. This is especially so when investment is in high-efficiency heat pumps.
(2) The desire for 'concrete' results
The desire for 'concrete results', such as a palpable increase in warmth, is a driver that can encourage householders to warmer home outcomes. For example, Environment Canterbury (ECan) has found it easier to promote change among households with open fires (which tend to result in under-heated houses) than in houses with old log burners, although this may in part be due to a greater focus on targeting open fires. For households currently using open fires (likely to be predominantly older dwellings and therefore less well insulated), substitution of the open fire with cleaner heating options can be associated with private gains in effective warmth as well as public gains in reduced air pollution. In such cases, householders experience satisfaction from achieving both personal benefit and contributing to public benefit.
(3) Increase in the number of two-income households
The increasing number of two-income households in New Zealand has probably led to an increased value being put on leisure time. This is likely to be a driver encouraging change to more convenient, less labour-intensive forms of home heating (eg, electrical heating or gas heating), and also quick-response spot heating. It has possibly also reduced heating needs by reducing the time during the day the house is occupied.
(4) Demographic transition
The elderly often use traditional heating appliances and have inadequately heated homes due to attitudes of frugality and 'doing without'. As this cohort declines, a demographic transition is taking place which supports changes to cleaner forms of heating. Future generations of elderly, who have not lived through war-time deprivations and the depression, will be less likely to have such entrenched attitudes. As a group, elderly people, many of whom live on fixed incomes, are always likely to experience more constraints on their spending ability - particularly for capital items. However, as elderly live longer and spend more of their lives in retirement, the attraction of increased comfort levels is likely to take on more prominence.
(5) Fashions in housing and home heating
New technologies in housing and home heating can influence householders' choice of home heating (eg, trends in under-floor heating and heat pumps). Some segments of the market are attracted by particular new technologies while others are not.
Inhibiting drivers
(6) The severity of local winter conditions
Location is a major driver, both in relation to the amount of home heating required (eg, greater heating required in colder areas) and in the choice of heating appliances. These two issues are not unrelated: in colder areas of the country more householders choose solid-fuel heating, in part because solid-fuel heaters can often provide greater quantities of heat at lower cost. This comparison indicates that severe winter conditions inhibit change to cleaner heating. It also points to the fact that local climatic conditions have a bearing on the cost-effectiveness of alternatives.
(7) Household tenure - rental accommodation
Living in rental accommodation can inhibit changes to cleaner heating and warmer homes. A tenant is unlikely to change to cleaner heating when it means investing in (and possibly increasing the value of) someone else's property, a property in which they may not always live. Also, a tenant may not have permission to make such a change without the landlord's consent. This kind of investment decision rests with the non-resident owner/landlord of the property. A number of considerations – that are likely to inhibit change – will probably influence the owner/ landlord, including the desire to limit expenditure on their property investment.
In some segments of the rental market landlords may regard investment in heating and energy efficiency as a feature that will add value to their property and make it more rentable. A relatedpolicy issue may be how to give renters knowledge of the home energy rating concept, and the value of a higher rating.
Big changes have occurred in home ownership patterns over recent years, the most significant for the Warm Homes project being the decline in home ownership and commensurate increase in rented houses. Some increase in rentals has been through new units and apartments, but many existing houses have been converted to rentals. The potential implication for the Warm Homes project is that this shift in ownership is pushing many houses with 'warm homes' problems into the rental category, and much of the increased numbers of rental properties will be older existing houses that are likely to be lacking insulation and efficient heating appliances. There is also an extreme segment in the rental market utilising houses in very poor condition, which the owner has no interest in upgrading because they are destined for demolition when a suitable re-development opportunity arises.
The rental sector is not a clearly defined homogeneous market. Within it there are many sub-segments, which may be described as follows.
- Executives: are typically renting for one year; competing with new homes and prepared to pay top rents because they expect 'all the mod cons' and a very high degree of comfort and convenience. This top end of the rental market is very competitive. Tenants are prepared to pay relatively high rents corresponding to high expectations for quality, comfort and convenience, their point of comparison being new dwellings.
- Students: are tied into 12-month contracts (usually beginning mid-summer), and are strongly influenced by rent level, location vis a vis transport options (walk, bike, bus, petrol), and proximity to where they travel frequently. The quality of house seems to be of little importance. Students don't tend to look ahead to the coldness of winters, and generally move to a different flat the next year - a decision likely to be determined by social factors such as choice of flatmates.
- Long term renters: cannot afford home ownership and take a long time to build up sufficient capital for the deposit. Long term can be up to 10 years or more. These are generally working people, with or without families, and affordability/savings ability is a critical driver.
- Perpetual renters: are identical to long term renters except they never get to buy their own home.
- Very low-income households – beneficiaries of some kind: are severely financially constrained, and take what they can get, irrespective of the condition of the dwelling. This is the easiest segment to rent to, driven by desperation, urgency and few choices. These renters are often very itinerant.
Overall, private rental sector key informant interviewees believe the average tenancy period to be seven to nine months (shorter in very low-income situations), indicating frequent opportunities to influence landlord decisions, since property owners are most likely to make improvements between tenancies. The short average tenancy may also be due, in part, to rental properties being cold and hard to heat. A survey of renters undertaken in Christchurch indicated that cold houses were one of the most important reasons for tenants moving. [KI interview: Jennifer Small.] In practice, such information, if given adequate exposure, should be a driver for landlords to make investments in improved heating of the dwellings.
In the private rental sector it is the property owner/investor who is most instrumental in making changes to the structure and fabric of the house, although tenant demands may provide important signals, particularly when seeking rental accommodation. Public rental accommodation (Housing New Zealand Corporation and territorial local authority-owned rental portfolios) is subject to the policies of the organisation. In owner-occupied dwellings the owner is clearly the most instrumental decision-maker.
It is worth noting, in relation to the New Zealand private residential rental market, that only around 30% of such property investors use the services of professional property managers (compared with around 90% in Australia), reflecting the New Zealand do-it-yourself culture and the high level of single-dwelling investments. [KI interview: Martin Evans, Christchurch Property Investors Association.] The significance of this lies in the fact that property managers generally make regular inspections (sometimes quarterly) of rental accommodation and file reports and recommendations to the property investors concerned, a practice that has the potential to provide opportunities for influencing investor decisions regarding dwelling insulation and heating options. The Residential Tenancy Act is currently being reviewed; the outcome of this review may have implications for the proportions of property investors using the services of professional property managers.
Although government is committed to reversing the declining trend in home ownership, the factors driving current trends have been quite strong over a number of years (eg, high house prices, lack of capital, indebtedness), and will not necessarily reverse easily. The conclusion drawn from this analysis is that the rental sector is pivotal to the success of the Warm Homes programme, and that the recent rental market trends mainly serve to increase the scale of the challenges to programme design, resourcing and implementation.
(8) Recent increases in residential electricity tariffs
It is a disincentive to any household to consider electrical clean-heat options when there is a risk of future price increases. It discourages people who currently use solid fuels, particularly those who have access to cheap supplies of wood (not generally the very poor, who don't have the ability to collect their own wood). [KI interview: EnergySmart.]
(9) Residential electricity tariff structures
There are only very crude price signals to conserve electricity in the residential market, or to change to more efficient forms of electrical heating such as heat pumps. Apart from night rate (11 pm–7 am) differentials, used mainly by electricity companies to spread the load, existing tariff structures (fixed daily charges and uniform consumption charges per kWh irrespective of level of consumption) give weak signals to residential consumers that electricity conservation would be beneficial, either in the long or the short term. A seasonal differential would be important if there was strong seasonal variation in the true price of electricity generation. (Note also that the environmental damage of electricity generation is unpriced.)
(10) Reliability issues for electricity supply
The memory of power shortages threatened several times over the past decade reduces householders' willingness to rely entirely on electricity for heating.
(11) Entrenched attitudes
Deeply ingrained attitudes held by New Zealanders entrench the practice of poorly heated homes – the attitude that says it's OK to live in cold houses or at best partly heated homes. This is particularly true for the older generation. This attitude is, however, less prevalent among expatriate New Zealanders and European immigrants accustomed to better standards of housing. [KI Interview: Ron Theaker, Energy Efficiency Homes.] Similarly, some older Maori hold to the attitude of personal sacrifice in favour of opportunities for younger members of the whanau. [KI Interview: Ed Parker, Waitara Employment Trust.] Older people living in their own mortgage-free homes can be very resistant to making improvements because it will cost them money and they're uncertain of the results, even though these same elderly may later have to move to a residential facility where they discover the joys of central heating but have to cash up their homes to pay the weekly fees. [KI Interview: Grant Dunford, Negawatt Resources.]
New Zealanders have a long history of heating their homes by 'burning something', which has created a cultural legacy that needs to be addressed. One key informant estimated that as many as 30% of New Zealand householders wanted 'to burn something' to heat their houses. [KI Interview: Terry Moody, Christchurch City Council.] Among these householders there is also a 'hard core' of those who profess a deep psychological attachment to open fires.
(12) Rising house prices
Rising house prices may have several flow-on effects which inhibit investment in alternative clean heating.
- It appears to be leading to declining rates of home ownership (and more people living in rental accommodation, for longer). This is especially evident among Maori.
- It is leading to households having more capital tied up in the initial purchase of their house and less capital available to spend on upgrades.
- Investors may more commonly be negatively geared (ie, the rent doesn't cover the loan repayments). [KI Interview: Martin Evans, Christchurch Property Investors Association.] In theory this should present a positive driver to encourage the adoption of more cost-effective heating because discretionary income has fallen. However, in practice, affordability barriers (discussed elsewhere) often make such an outcome unlikely.
(13) Cost and affordability of change
Many aspects of home heating – the choice of heating appliance, the level of expenditure on fuel or electricity, the choice about investing in improved insulation, and therefore the level of comfort and healthiness achieved – are subject to the opportunities and constraints of household income. As noted earlier in this report, it is a well-established fact that significant numbers of households in New Zealand do not spend enough on home heating to provide indoor conditions conducive to good health, simply because they cannot afford to. Other households make similar decisions out of choice, influenced by attitudes or different priorities (see below).
(14) Individual household priorities
Not everyone puts the same priorities on environmental objectives (air quality) or improving home heating and personal health as policy makers would like. Drivers for home heating behaviour have to compete with drivers for other things that householders hold to be important, and these will vary immensely across the population. [See for instance: Centre for Sustainable Energy, 2004.]
3.3 Knowledge, understanding and skills to make decisions to change
Encouraging drivers
(1) The increasing range of information sources available on home heating options
The range of information sources available on home heating can influence changes to home heating. The use of different media [KI Interviews: EnergySmart; Nelson City Council; Insultech; Carrier Air Con.] (written media such as rates notices, power bills, local newspapers; TV adverts, radio adverts, Energy Efficiency and Conservation Authority promotions, word of mouth) and a range of sources (regional councils, health agencies, energy companies, energy efficiency companies) is particularly important. Information from a range of sources can be particularly useful for promoting the message to 'harder to reach' households. Combined efforts at promotion are gradually raising awareness of both the social value and the private value of change.
(2) Increasing the exposure of New Zealanders to international experience of well-heated homes
New Zealanders are becoming increasingly exposed to international experience of well-heated homes. The traditional acceptance by New Zealanders of poorly heated homes is now much less prevalent among expatriate New Zealanders and European immigrants accustomed to better standards of housing. [KI Interview: Energy Efficiency Homes.] As international travellers, this group is most likely to be relatively unconstrained financially and more likely to change their home heating conditions and choices without financial assistance from the government, since they have already experienced the benefits of higher standards of home heating and need little convincing.
Inhibiting drivers
(3) A lack of information and 'understanding'
A lack of information about the range of heating appliances available and the benefits of clean heat appliances can inhibit changes to cleaner heating methods. Notwithstanding the positive driver of an increasing range of information sources, there appears still to be a very high level of ignorance and misconception about home heating issues among the public at large.
(4) The absence of a practical, assessable minimum standard for warm homes that is easily understood
There is no practical, assessable minimum standard for warm homes that is easily understood. Ambient air quality has a well-defined 2013 target in terms of the acceptable number of exceedances, but indoor ambient conditions have no corresponding well-defined target that people can relate to. The absence of an easily understood standard or indicator means that individual households have little way of knowing whether or not they are heating their homes to healthy standards.
3.4 Influences from the public policy environment
Encouraging drivers
(1) The publicity and focus of research around health and housing
The publicity and focus of research around health and housing have had an impact on people's attitudes, [KI Interview: Robyn McKeown, EnergySmart.] by raising awareness of the links between insulation, adequate heating and better health. The very fact that the research was commissioned and funded is an indicator of the recognition and growing importance attached to this issue in policy circles. This raises the question of how effectively this research is used and which segments of the market are most likely to be influenced by the research. This is likely to depend on the communication medium (verbal, written, visual, etc) and on perceptions of the messenger (a stranger, like the appliance retailer; or a trusted person, like a nurse or GP).
(2) Publicly funded programmes stimulating the general market for energy efficiency and clean heat options
By stimulating demand from participating households for new clean heat technologies, publicly funded programmes (such as Environment Canterbury's clean air initiatives, Nelson City Council's clean air initiatives, and the Energy Efficiency and Conservation Authority's initiatives) and their associated promotions generate a flow of business activity which gives suppliers of clean heat technologies a greater presence, adds to their profile in the general market, and raises the awareness of other households (either through the programme promotions, increased private sector marketing efforts or word of mouth). Thus publicly funded programmes influence decisions not only for the targeted households but for households generally.
Publicly funded programmes help stimulate the general market for energy efficiency and cleaner heating options like heat pumps. [KI Interviews: Insultech; Carrier Air Con; Insulation Services.] The general market, by definition, involves those who have already informed themselves of the benefits or who know the experience of people who have taken part in the funded programmes, and who are not constrained in their own choices by insufficient funds.
(3) Central government intervention to cap electricity prices and ensure reliability of supply
Existing users of solid-fuel home heating will be less reluctant to change to electrical heating sources such as heat pumps if the government steps in to cap prices and to place reliability of supply as a key policy goal. For households choosing to convert to clean heat without public financial assistance (or with only modest incentives) for reasons of convenience or comparative cost, low electricity tariffs reinforce the choice. Similarly, for households participating in fully assisted conversions, low electricity tariffs reduce the financial risks of adopting the electrical heating option.
The relatively low price of residential energy does not encourage householders with discretionary income to spend on improved insulation because it has the effect of reducing the financial benefits to householders. [KI Interview: Pamela Storey, Huntly EE Trust.] US experience suggests that people change when energy prices are high, conversely, relatively low electricity prices may make householders more inclined to consider electrical clean-heat options such as heat pumps.
(4) Policy to encourage more women into paid employment
See 3.2(3) above relating to dual-income households and the value of leisure time. Note that this is an example of an initiative in the public policy environment that many people might regard as totally unrelated to Warm Homes drivers and outcomes. It is certainly a policy objective whose origins have nothing to do with environmental quality or energy policy considerations. Nevertheless, within the conceptual framework presented here, it is possible to see how such a policy initiative may indeed have a bearing on the processes of household change that are relevant to the Warm Homes programme.
Inhibiting drivers
(5) Gas industry restructuring and the ability of gas suppliers to offer financial incentives
Gas industry restructuring has reduced gas suppliers' ability to offer assistance or incentives. When there was an integrated industry it was possible to offer turnkey packages, [KI Interview: Gas sector.] but now the benefits are split between several operators and the transaction costs have increased. This is likely to be a factor more for new homes and relatively wealthy households converting to several gas uses (eg, water heating, space heating and cooking).
(6) Lack of protections for tenants with regard to the condition of some rented properties
There are no minimum standards for home heating/insulation. [KI Interview: Stephen Ward, Robert Tromop EECA.] The lack of effective regulatory protection is likely to reinforce the most powerless tenants in their view that there is little they can do to alter their home-heating circumstances, and so they are likely to continue their use of cash-flow and portability-driven options, such as unflued gas heaters. This situation could change when the outcome of the review of the Residential Tenancy Act is known. While unflued gas heaters are a cleaner form of home heating than solid-fuel appliances (for the external environment), it is generally considered that they do not contribute to improved health. These heaters release high volumes of water vapour, which can result in health risks from dampness and moulds, and the gases from the combustion process can adversely affect respiratory health.
(7) The absence of any general tax incentives related to home heating
Successive governments have moved away from providing population-wide tax incentives for any form of policy promotion.
3.5 Influences from the community and the immediate social environment
Encouraging drivers
(1) Public lobbying by social agencies on the links between health morbidity and warm homes
Public lobbying by social agencies on behalf of their constituencies (eg, Age Concern on behalf of elderly people) raises awareness among their members of the issues and appropriate behaviours.
3.6 The orientation of home heating and related commercial services
Encouraging drivers
(1) Improved range of technology options available
The technology options for both cleaner heating sources and all aspects of domestic energy efficiency and insulation have increased markedly in recent years.
(2) Capability of firms providing commercial services
A numbers of firms have developed a history of commercial operations providing energy efficiency services at the household level (many through Energy Efficiency and Conservation Authority-sponsored programmes). Some firms are evolving towards providing 'whole-of-house' solutions that cater to cleaner heating. In contrast, some firms put commercial interest and supplier allegiance first by promoting particular brands or models of heating appliance, regardless of suitability to the situation. Also, the commercial sector has its share of 'cowboy' operators who cause difficulties for market development by providing sub-standard installations and workmanship.
(3) Geographic coverage of firms providing commercial services
Most towns and cities now have firms supplying new technologies such as heat pumps, linked to other appliance supply.
(4) Solid Energy's decision to stop coal sales to the domestic sector
Solid Energy has made very public statements about the link between its decision to terminate domestic coal sales and regional council efforts to address air quality problems. Even though there are other private-sector coal suppliers who continue to supply the domestic market, the stance of Solid Energy is a very public gesture from a major energy-sector player.
Inhibiting drivers
(5) Firms promoting particular products
Firms that promote particular products, rather than packaged solutions suited to the individual dwelling and household are a factor in potentially inhibiting changes to cleaner heating and warmer homes. A particular product or brand may be put forward rather than the best package for the household. [KI Interview: Grant Dunford Negawatt; Insultech.]
(6) 'Cowboy' operators
There are 'cowboy' operators installing heat pumps - often operators who see the chance for fast money when publicly funded schemes are operating. They compete by using cheap imported brands/models or insulation materials, and cutting corners in installation in order to be able to offer the cheapest price. They also lack the training and technical know-how.
(7) Lack of reliable 'real life' standards for clean-heating/energy-efficient appliances
Clean air approved appliances have standards set on the basis of testing procedures. There is concern that these do not always represent 'real life' conditions, and that some appliances continue to be sold under the guise that they are 'clean air'. For example, heat pumps vary in terms of their performance and energy efficiency. Not all are well suited to New Zealand. While Environment Canterbury has set standards for the Clean Heat programme (as has Nelson), there are no such standards applying in the general market, with the risk that substandard products might produce disappointing results.
(8) The lack of financial products designed to facilitate the market for clean heating options
For a large part of the market – middle New Zealand - it appears that a potentially significant issue influencing household choices about whether or not to change home heating or invest in better insulation is the capital cost barrier. Financing arrangements that help people over this hurdle have the potential to be very influential.
