Key takeaways

The policy problem

It’s very difficult to find a rental property with rooftop solar. In 2017-18 (the latest figures available) only around four per cent of renters in Australia had rooftop solar, compared to 25 per cent of homeowners. This limits the ability of renters to benefit from decreased electricity bills associated with solar installation.

To remedy this situation, it is necessary to understand what property investors perceive as core barriers to installing rooftop solar on rental properties and to assess the feasibility of policy design mechanisms to address these barriers.

The findings

Research led by ANU suggests that investors’ perceptions of an unfavourable distribution of benefits is the primary barrier to further investment in solar on rental properties. In other words, investors believe there are simply not enough positives for them. Another major barrier is the substantial upfront cost of solar.

The researchers found that policy options that reduce upfront costs (like interest free loans) appear to appeal to only a minority of property investors. Nor were the property investors swayed by the idea of a potential mechanism that could share the financial benefits of solar by distributing feed-in tariff payments to property investors, either through their bills or a third-party not-for-profit. This option wasn’t preferred by any property investor group, suggesting that it willl be necessary to explore different benefit distribution mechanisms.

They also tentatively found that some property investors are less averse to paying for solar when they perceive that tenants will pay higher rents for a property with solar. But these findings weren’t robust across model specifications and couldn’t be considered conclusive. This is, however, the most promising area for future policy design and future research.

Possible policy responses

• Improve the benefit-cost trade-off for property investors, particularly through an increased appreciation of the value of solar in the rental market and an accompanying confidence for all stakeholders in the appropriateness of higher rents for solar properties.
• Make different options available for repayment of system costs, for example, by offering both the option to repay the system costs upfront, as well as an option to spread the costs out over time.
• Implement an education campaign to highlight existing and new knowledge about willingness-to-pay by renters for properties with solar PV. A major barrier to investment in solar PV is a belief by property investors and property managers that renters would be unwilling to pay higher housing rents.
• Consider active monitoring and disclosure of the performance of solar PV systems to the rental market (to provide the market with assurance that a system is operating well).
• Consider targeted actions such as state supported trials to build investor confidence in returns on investment and familiarity amongst property managers, to increase awareness of the value of solar.

Further consider opportunities for co-creation between stakeholders in designing policies to promote solar PV on rental properties