New research shows cost benefits of insulation

New research conducted by Infometrics, paid for by the New Zealand Green Building Council (NZGBC), shows that owners of a 6 Homestar-rated home could save $62,000 in electricity and mortgage costs over a 30-year period 

Level 6 Homestar-rated homes are built above minimum H1 standards requirements. However, most locations only require minor improvements to minimum standards – typically in the form of increased ceiling insulation or added wall and ceiling linings. On average, 6 Homestar-rated homes cost 0.8% more to build for standalone dwellings and 0.7% for terraced dwellings when compared to building to Code. 

“Homeowners can expect to pay that investment off in just two to three years through lower interest and energy bills, and then generate savings compared to having a non-Homestar house,” said Brad Olsen, Chief Executive and Principal Economist at Infometrics. 

“More diligent households could choose to put their interest and electricity savings towards their mortgage, to become mortgage free earlier. Following this strategy, households would pay the same as they would have without Homestar and become mortgage free earlier.” 

For developers, the report said residential property developers could access discounted borrowing rates from BNZ, Westpac, ASB and KiwiBank for 6 Homestar-rated developments, which are determined on a case-by-case basis.  

“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, NZGBC Chief Executive. 

While Greenstar-rated homes are built above current H1 standards and most would expect them to be more expensive, Building and Construction Minister Chris Penk has said the H1 insulation standards which came into force in May 2023 added “significant” additional build cost. 

In December 2024, he said: “I had received (a number of concerning reports) that the new standards were adding significant additional costs in some cases.” 

However, an analysis undertaken by the New Zealand Certified Builders (NZCB) and industry organisation EBOSS suggests that compliance methods can make a big difference to the cost of being H1-compliant, and that the most commonly used compliance method – the schedule method – is the most costly. This is because calculation and modelling methods allow adjustment of the insulation levels of different building elements to meet H1 requirements in the most cost-effective way. 

The report calculated that H1-compliant insulation would increase build costs by just $2,179 versus the pre-2023 build cost for a 140m² three-bedroom home if using the calculation method. 

Remarkably, the report showed a 92m² two-bedroom home would actually be $1,334 cheaper to insulate than under pre-2023 standards, with superior insulation – but only if requirements were calculated using the calculation method. 

Modelling method savings 

While the NZCB and EBOSS analysis didn’t consider the modelling method in their analysis, BRANZ research shows that cost savings can also be achieved when using the modelling methods versus the schedule method to meet H1 standards. When using the modelling method, cost savings between $2,318 to $15,071 can be found for housing and small buildings. 

H1 not to blame 

Research appears to contradict concerns, recently voiced by Penk, that increased insulation requirements was caused uncomfortable living conditions. 

In response to reports of some Auckland homes reaching 30 degrees Celsius overnight, Stuff reported that Penk told the Housing Summit in Auckland that upgrades to energy efficiency standards were “out of whack” and resulted in people “being cooked alive in their own house”. 

“It seems to me that the ventilation part of the Building Code needs an update and obviously the insulation, or rather energy efficiency element, has been addressed in the sense of the H1 rules,” he said. 

“We’ve got to see a regime where people aren’t being cooked alive in their own house.” 

Design it right 

However, ventilation and heating/cooling systems serve different purposes: ventilation focuses on air quality and moisture control, while heating/cooling regulates temperature. Ventilation introduces fresh air to dilute pollutants and humidity, which can improve indoor air quality and reduce mould growth. Heating and cooling systems maintain desired temperatures for comfort. 

In addition to that, an article by BRANZ indicates overheating in homes was a problem before the final date for updated H1 regulations came into force in November 2023. In Issue 198 of Build magazine, published in October 2023, BRANZ ran an article, which said preventing overheating should be a consideration for designers. 

In the article, BRANZ said designers should consider: 

• Building orientation that takes advantage of cooling breezes. 

• Passive design options such as cross-ventilation and stack ventilation, where fresh cool air enters a building at a lower level and hot, stale air is naturally expelled at a higher level (eg, skylights). 

• Shade devices such as eaves and louvres. 

• Window placement, size and glazing appropriate to the local climate and orientation. 

• Using thermal modelling tools to identify designs with optimal indoor temperatures. 

BRANZ also published an article in April 2022, which addressed the problem of summer overheating in Kiwi homes. 

“Summer overheating is becoming a problem in many of our houses. Designers should consider the solar heat gain coefficient when selecting glazing to help reduce this risk,” stated the article at the time.