Why Australia's 7-star energy standard has divided the building industry

New houses must now reach a minimum 7-star rating under the Nationwide House Energy Rating Scheme (NatHERS), up from 6 stars, the first increase to the minimum standard in more than a decade. New apartment buildings must average 7 stars across all units, with no single apartment allowed below 6 stars. Both changes took effect under NCC 2022, then rolled out state by state from late 2023.

Houses now need a Whole of Home score of at least 60 out of 100; apartments need at least 50. This added a new layer of assessment, covering:

• Hot water systems
• Heating and cooling
• Lighting
• Onsite energy generation, such as solar panels and battery storage

The standard moved beyond the building shell to assess the home as a broader energy system. New South Wales is the exception: it uses its own BASIX scheme instead of a NatHERS Whole of Home assessment, aiming for similar energy-efficiency outcomes through a different pathway.

NatHERS is the main pathway used to meet residential energy-efficiency requirements, accounting for more than 90% of building approvals over the long term. That scale is why the change affected a large share of new-home construction at once. The timing added to the impact: the previous 6-star minimum had stood since 2010, making this the first update to residential energy efficiency requirements in more than a decade. NatHERS itself is older still, having been adopted nationally in 2003 and 2004.

The Housing Industry Association, known as HIA, puts the added cost at about $20,000 for a typical new house in Victoria from 1 May 2024. Its estimate combines the new 7-star energy-efficiency minimum with better accessibility requirements, rather than isolating the cost of the 7-star change alone.

HIA's broader position is that government modelling underestimates the real cost of moving from 6 stars to 7. It also points to broader ABS data showing building costs were already climbing sharply, arguing that a code change landing on top of that inflation added pressure to an industry already under strain.

The builder-side case is not a fixed dollar amount added to every house. It combines redesign effort, compliance risk, timing and a difficult broader cost environment into a single upfront-affordability argument, but it does not provide a clean national estimate for the isolated cost of moving from 6 stars to 7 stars.

New South Wales and the Northern Territory moved first, from 1 October 2023. NSW did so through its existing BASIX scheme rather than a straight NatHERS Whole of Home pathway. The Northern Territory set its own minimum of 5 stars from that date, rather than adopting the national 7-star standard. The ACT followed on 15 January 2024, and Victoria and Queensland both started on 1 May 2024. Queensland introduced the changes through Queensland Development Code 4.1.

South Australia adopted the standard later, from 1 October 2024, and paired the change with a commitment to ten years of regulatory certainty. Western Australia was the last mover, with its residential energy-efficiency provisions taking effect from 1 May 2025 after transitional arrangements ended. Tasmania deferred the 7-star provisions and kept its NCC 2019 energy-efficiency requirements in place.

Where governments have explained their reasoning, the language is mostly about certainty, transition and staging. South Australia's ten-year commitment and Queensland's staged approach both show attempts to manage the changeover. For Western Australia and Tasmania, the clearest official material focuses on the transition date or deferral, rather than a detailed public rationale for the delay.

A $20,000 upfront estimate and a 1.37 benefit-cost ratio are both figures used in the debate, but they measure different things over different timeframes. The upfront estimate focuses on construction costs, while the benefit-cost ratio includes modelled long-term energy savings and other benefits.

For builders, affordability is often measured at contract signing and during construction. This view focuses on redesign work, compliance risk, assessor fees and higher upfront costs landing in a market that was already under pressure.

For supporters of the standard, affordability is measured over the life of the home. The official, state government and advocacy modelling covered above all make a similar case: a home that costs more to build upfront can cost less to run over time.

A national Trajectory for Low Energy Buildings Implementation Plan for 2026-2027 was approved on 16 December 2025, confirming that government work on building energy performance is continuing beyond the original NCC 2022 changes.

On 1 July 2026, the Australian Government launched the new Home Energy Rating brand and website. This included the rollout of Stage 2 for existing home ratings, extending the rating framework beyond new homes.

At a jurisdiction level, the next code cycle is already underway. In the ACT, projects with a development application or works approval application formally lodged before 1 November 2026 may continue to seek building approval under NCC 2022 or NCC 2025 until that application expires. Projects with building approval after 1 May 2027 must comply with NCC 2025 and the ACT 2025 Appendix, subject to that exception.