Iconoclastic economist Ian Harrison of Tailrisk Economics has taken aim at the cherished beliefs of Housing Minister Phil Twyford in a discussion document titled The proposed Healthy Homes Regulations: An Assessment.
Twyford is finalising a series of standards for New Zealand’s 588,700 rental properties on heating, insulation, ventilation, moisture and draught-proofing under the so-called Healthy Homes Guarantee Act that was passed last December.
As justification, the Minister points to assertions that many New Zealand houses, not just rental houses, are “cold and damp” and that this has health implications.
A key touch point is that our homes don’t meet a World Health Organisation recommendation that indoor spaces be heated to at least 18C.
The Healthy Homes Standards discussion document put out for public consultation in September has six pages of references which give the appearance of sound and thorough research. But for anyone who goes to the papers and checks the claims, it quickly becomes obvious that:
1. Only 2.7 percent of tenants thought that their rental was cold and damp, according to a survey by the Building Research Association of New Zealand in 2017, and of that percentage it was not clear what proportion was due to inadequate use of heating and a failure to ventilate by tenants.The bulk of the paper was devoted to a cost benefit analysis done for the Government by the New Zealand Institute of Economic Research, that Harrison described as “client friendly”. Key “unhelpful” documents were sometimes ignored, costs were systematically understated, and unrealistic methodologies were adopted that overstated the net benefits, Harrison wrote.
2. The World Health Organisation did not recommend a minimum indoor temperature of 18C. What they did say was that no conclusions could be reached on the average indoor ambient temperature below which the health of the general population may be considered endangered.
3. Research evidence shows that the common New Zealand practice of lightly heating bedrooms does not present a health risk.
Harrison redid the cost benefit analysis by including the unhelpful documents while correcting costs and methodologies to find that a heat pump in every living room would come at a capital cost of $457-million bringing a net loss of $500-million.
Insulation top-ups would cost $410-million bring a loss of $269-million, ventilation would cost around $200 million with very limited benefits, moisture proofing would cost around $300-million with no material benefit, and draught-proofing would cost around $300-million, again with limited benefits.
The NZIER’s assessment of the cost of insulation was based on outdated prices and only considered ceiling insulation, which by excluding subfloor costs, increased its benefit.
When questioned on why underfloor insulation was not included, NZIER said that they were directed by the Ministry of Business, Innovation and Employment not to consider it.
The value of underfloor insulation is marginal because only 10 percent of heat is lost through the floor while 40 percent is lost through the ceiling.
The evidence shows that “healthy homes guarantee” slogan is nothing more than political spin, which is very bad news for all rental property owners who may be forced to spend around $7000 per dwelling on unnecessary upgrades.
Since an insulation top-up costs the same as insulating from scratch, all those “good” rental property owners who have installed insulation since whenever have probably wasted their money because they may have to re-do it. The proposed Healthy Homes Regulations: An Assessment may be read at http://www.tailrisk.co.nz/documentlist.
Ian Harrison, who has a BCA Hons from Victoria University Wellington, and a Master of Public Policy SAIS Johns Hopkins, has worked with the Reserve Bank of New Zealand, the World Bank, the International Monetary Fund, and the Bank for International Settlements.
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