A Cost Benefit Analysis of the Wellington School of Medicine’s Housing, Heating and Health Study Student: Nick Preval 2 nd Year Thesis, MEnvStud Victoria University, Wellington Supervisor: Associate Professor Ralph Chapman

Background Energy usage in NZ – 13% residential NZ housing stock – generally considered poor, particularly when compared to Northern Europe – only a third of houses have insulation. Space heating is also inefficient and unhealthy, central heating is rare, and average winter temperatures are sometimes below WHO guidelines (20 degrees living room, 18 degrees bedroom, 16 degrees minimum). Health and housing: cold houses cause physiological stress on vulnerable people. Dampness related to coldness can lead to mould growth which can cause respiratory symptoms. Emissions from unhealthy heaters may also contributed to symptoms and increase dampness. Highest rates of respiratory illness in OECD.

Housing, Insulation and Health Study First study of it’s type – involved insulating homes, Selection criteria: households uninsulated, had one member with history/ reported symptoms of a respiratory ailment Households. Winter 2001 baseline, winter 2002 intervention/control. Outcomes: reduced energy use, dampness, fewer days off school and work, fewer reported G.P visits

The Housing, Heating and Health Study Explores health benefits of more efficient health heating using similar method. 400 households recruited Home insulated prior to winter 2005 (baseline) Households given a choice of heat pump, pellet burner and flued gas heater. Most households (297) chose heat pumps, some (58) chose wood pellet burners, and nine chose flued. Currently released outcomes have generally been positive.

The Housing, Heating and Health Study

CBA What is CBA? Why it is useful? Part of the development of public policy, allows different options to be analyzed. CBA of Insulation Study revealed a: Benefit: Cost Ratio or nearly 4:1. (Chapman et. al, unpublished)

Aims and Objectives To establish the ratio of costs to benefits for an intervention of this type To complete a sensitivity analysis To explore the full spectrum of benefits and costs, including those that may not be used such as measures of comfort, mortality, peak load and mould related loss of structural integrity. To analyse results for each study heater in detail Explore influence of income, ethnicity and tenure

Methodology Basic formula: Σ i n (Bi – ci) (1 + r) ^i Assume a 20 year average lifetime for the study heaters. CBA – criticisms and limitations Discount Rate issues: what rate to choose? Treasury use 10% as a starting point (Treasury, 2005) Others argue that in this type of intervention (a social intervention which is currently under-provided and with many external benefits) a rate closer to 5% may be appropriate (Chapman et al, Young, 2002).

Methodology Comparing 2005 and 2006 data. (The change in the change) Converting from a 3 month period to a full year – a factor a 1.67?

Costs and Benefits Days off school Days off work Medical visits

Costs and Benefits Cost of the study heaters Costing heaters in the control group Assumptions about heater age, lifetime, usage. Maintenance costs.

Costs and Benefits - Energy Use Electricity and Mains gas costs Costing solid fuel use Issues: Conservative vs. less conservative projections of the real price of electricity and gas during the next 20 years Choose conservative option but will explore issue via sensitivity analysis.

Issues Mortality: can we take account of the effect of reduced cold/damp on mortality? Comfort: what is it and can we put a price on it? Health and environmental impacts of reduced local emissions. Peak load reduction: findings from the Orion study – can they be used? Mould and structural integrity - over 20 year period reduced mold will have an impact on building structure: can we estimate the value of this? Heat pump = air conditioner? (HEEP study).

Issues: Mobility and Aging Family mobility - multiple factors: employment, health, changing family structure, family life- cycle, satisfaction with home. Effect of improved heating on length of occupancy: no research has focused on this question alone as far as I am aware: need to make and justify assumptions. Children aging: responsiveness of childhood asthma to aging.

Conclusion Preliminary results show that the intervention has achieved some of the positive outcomes predicted. It remains to be seen whether CBA will suggest this is a economically justifiable intervention. A lot may depend on the resolution of issues such as length of occupancy and choice of discount rate etc.

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