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It is well known that Australian homes have poor energy efficiency compared to other wealthy countries. This is largely because most homes were built before mandatory efficiency standards were introduced in 2010. Research has shown that the average pre-2010 Australian house rates just 1.8 stars out of 10 using the NatHERS national  energy rating system. Poor energy efficiency makes homes uncomfortable, is bad for health, increases energy bills and drives up emissions.  

On 18 September 2025, the Australian government announced its 2035 climate target of 62-70% reduction in emissions on 2005 levels as part of the plan to net zero by 2050. The Built Environment Sector Plan, that accompanied that target, recognised the critical role that improving home energy efficiency will play in delivering these outcomes.

So, what can be done to address this?

Our policy mapping research conducted a deep dive into government policy at all three levels—federal, state and local—to find answers about how to improve home energy efficiency across all of Australia’s housing stock.  It identifies gaps and opportunities for all levels of government.

We found major gaps in Commonwealth policies and vastly different levels of commitment to energy efficiency upgrades across state and territory governments.

Across the nation, reform is most needed to assist households to upgrade the thermal envelope of buildings (such as insulation, draught proofing and replacing windows).  There is a need for greater access to finance to offset the high upfront costs of upgrades (particularly for lower-income households) and targeted policy attention for rental properties.

We identified a total of 129 out of 537 local councils across Australia have developed energy efficiency programs to support their local communities. These programs are responsive to the local climate, and many are designed to address the existing equity gaps in Commonwealth, state and territory policies. Community organisations dedicated to upgrading energy efficiency are also springing up across the country, often in collaboration with local councils. 

A complex web of federal, state and local government policies shapes home energy efficiency upgrades for Australian homes. Mapping these policies reveals critical gaps and opportunities for reform.

Our report identified the need for dedicated Commonwealth and state funding to support local initiatives to accelerate and expand place-based efforts.

Australia's three levels of government play different roles in home energy upgrades. 

Federal government sets the national policy agenda. This includes co-ordinating the National Construction Code (NCC), national emissions targets and the recently released Built Environment Sector Plan. 

States and territories have primary policy responsibility for energy generation, energy efficiency and building standards through adopting the NCC into state law. 

Home energy efficiency is not ‘core business’ of local councils who operate under state law, but they have influence through their planning instruments that impact some new builds and renovations, along with developing local energy efficiency programs.

Our policy mapping reveals that federal government policies make important contributions to success around solar and batteries, but also require greater commitment to existing models and equity. Current policies focus heavily on incentivising solar and batteries through the Small Scale Renewable Energy Scheme and $1 billion in interest-free loans through the Clean Energy Finance Corporation made available through select lending institutions. These policies have driven the high uptake of solar (along with state policies) but mostly support higher income owner-occupied households. And in a backward step, the federal government recently announced a freeze on upgrades to the NCC.

On a state-by-state comparison, ACT and Victoria lead with multiple policy approaches, while Queensland and NT show very limited policy commitment.  

Our analysis reveals the need for the Commonwealth, states and territories to demonstrate greater commitment to existing models. This includes the 7 star NatHERS rating and future planned upgrades, a phase out plan for gas in residential buildings for all states and territories (currently only in ACT and Victoria), adopting the Home Energy Disclosure Framework that requires mandatory disclosure of home energy rating at the point of sale or lease, along with minimum rental standards (currently in ACT and Victoria with a Bill before the SA Parliament).   

The analysis also showed the need for all jurisdictions to address the lagging rental sector, amounting to about a third of Australian households. With a co-ordinated approach between the Commonwealth, states and territories needed to deliver new models of green finance to fund the high costs of upgrades for low-income households.  

Local place-based solutions are important

The research also highlights the vital role of local councils and community organisations in delivering place-based solutions.

A number of councils have now banned gas in new residential buildings through their planning regulation (first in Victoria before the state ban and now also across several NSW metropolitan and regional councils).   Councils are also developing local programs. Victoria demonstrates the greatest number and most comprehensive programs, indicating that state government commitment is a strong factor in facilitating local programs. However, many councils and community groups across the country want to expand their programs but lack dedicated funding. 

We recommend coordinated Commonwealth and state funding being available for local councils, plus expanded support for community groups that are already delivering innovative local solutions.  This funding should include administrative support, along with effective monitoring and evaluation of programs to substantially accelerate existing efforts attuned to local conditions.  

Together these initiatives are critical for addressing the poor energy efficiency in Australia’s housing stock, improving comfort in increasingly intensifying climates, lowering energy bills and reducing emissions as energy grids decarbonise.

As we race toward 2030, developing better policy coordination on home energy efficiency will be crucial to Australia delivering on our global climate commitments. Ultimately better policy, integrated across all levels of governments, holds the key to delivering equitable programs that will provide more energy efficient and comfortable homes for people living with increasingly extreme seasonal temperatures.

9 key recommendations from the policy deep-dive:

1. The Commonwealth, states and territories all commit to 7-star NatHERS ratings for all new builds, along with commitment to future planned upgrades.
2.  All states and territories should phase in bans on gas connections, beginning with new residential buildings. 
3. The Commonwealth, states and territories should  Increase policy focus on thermal upgrades (insulation etc) for all existing buildings..
4. All states and territories implement the mandatory disclosure of property energy ratings at point of sale or lease.
5. All states and territories should establish minimum energy efficiency standards for rental properties..
6. A co-ordinated approach to policy development for financing upgrades in the rental sector that are equitable for renters. 
7. The Commonwealth, states and territories develop new models for green finance that target low-income households with insights from international experience.
8. Investigate one-stop-shop models to help households upgrade.
9. Provide dedicated funding for local government and community organisations which include administrative support along with effective monitoring and evaluation.