Australia's Two-Star Housing Problem – And Why ValAi Thinks Banks Will Fix It

We are all comfortable with the idea that a new kitchen or an extension will lift the value of a home. Almost nobody thinks that way about energy efficiency. Yet the energy and carbon credentials of a house will soon play a serious role in what it is worth – and most Australian homes are nowhere near ready.

That was my conversation on The Proptech Podcast with Allys Todd, co-founder and CEO of ValAi, a startup using AI and data to help valuers, banks and insurers understand the climate risk inside their residential portfolios, and to help homeowners work out what to do about it.

The problem nobody has priced in

The scale of the gap is the part that stopped me. As Allys put it: "in Australia, to keep it hyperlocal, 78% of homes that exist today were built before energy rating standards existed."

The majority of our housing stock has no energy efficiency score, or a very poor one. And around 19% of Australia's carbon emissions sit inside homes and residential assets. We are not going to bulldoze and rebuild our way out of that – as Allys said, it simply is not feasible. The only realistic path is upgrading the homes we have.

ValAi's founding insight came from valuation. Allys' co-founder, Tom Reed, is a valuer who noticed that energy efficiency metrics are not currently linked to the market value of Australian homes – and, tutoring at university, that graduates entering valuation were not considering sustainability at all. Allys came from the other direction, with a background in climate impact, earth sciences and policy.

How ValAi works

ValAi is primarily a B2B business, selling banks and insurers the data insights they need to report on climate risk and, more usefully, to trigger behaviour change among their customers.

The piece I found most interesting is the consumer side. ValAi runs Home Efficiency Australia, offering a free Digital Home Health Check that takes three to five minutes. You search your property, add information about the inside of your home, and ValAi validates it against other sources – your climatic zone, your location and aspect, aerial imagery analysis of your house.

Back comes an energy efficiency score, a sustainability rating similar to NatHERS, your market value, and a carbon footprint profile based on the energy you use now. Critically, it benchmarks you against other Australian households, then runs a recommendation engine over the result.

Allys described it neatly: "of the 25 things you could be doing, based on the data on your exact home, these are the best things that you should start with to start your decarbonisation journey." Complete with ROI data and available rebates.

I asked because I have skin in this game. We are looking at solar and it has been a learning curve – dig out the invoices, work out what devices you have, find a spare weekend. Allys' response was that friction is the enemy: "the more hurdles we need to get through to participate in this, the less Australian consumers will be motivated to participate."

ValAi calls the in-home layer novel data – the detail about livability and wellbeing you will never find on a listing portal, and which shifts with the people inside the house. Two identical homes on the same estate can have very different carbon profiles once a family moves in.

Why this matters for the Australian property industry

We know how this story ends, because commercial property has lived it. NABERS has operated in the commercial sector for decades, and it is now unremarkable that better-rated buildings attract better rents and better tenants. Residential is simply behind.

The economics are already visible. Allys pointed to data showing homes that have been uplifted – keeping their character features but with good energy efficiency ratings – are achieving 5 to 10% more return on salability. ValAi's ambition is to reach a million homes, which it calculates could save Australians up to $825 million in energy bills if two and three-star assets are lifted towards six or seven stars.

There is a risk story here too. From work with groups including the World Energy Council and reinsurers such as Munich Re, Allys said global forecasting suggests many homes may become stranded assets or uninsurable in future. That is a valuation, lending and insurance question at once.

Which is why she is not worried about competitors. "We need to have more than one horse in the race," she told me, "because not one size fits all when it comes to Australian properties and our decision-making."

The reflective bit

What I keep coming back to is ValAi's insistence that "no home is left behind in this transition, and this is about a just transition." It is easy to build the eco home for the 1% who can afford it. It is far more valuable to give every homeowner a clear view of where they stand and what to do first.

For agents, valuers and property managers, this is a heads-up. What buyers and renters will soon ask for is not just beds, baths and cars, it is what this house costs to live in. ValAi already sells a SaaS product to agencies for exactly that conversation.

And my own hypothesis, which Allys agreed with: if you are thinking of upgrading your home's efficiency, do it now. Once ratings arrive and everyone discovers their two-star reality, the queue for tradies will be very long indeed.

More from this episode: read the show notes or read the full transcript.