A snug home. Photo by Louise Framtpon.

Up to 500 Dunedin properties could be made warmer in the next 12 months, if a new scheme initiated by the Dunedin City Council attracts enough takers.

From Monday, Dunedin homeowners and landlords will be able to apply for financial assistance from the council for up to $5000 as part of a $2.5 million year-long trial to help homeowners and landlords retrofit insulation and fit "clean" heating systems, such as wood burners, pellet burners or heat pumps.

The loans will carry an interest rate of 7% and be paid back to the council through 10 years via a targeted rate on the property.

The new scheme was ratified in the city's budget for 2012-13, and adopted by the council on Monday as part of its 10-year long-term plan.

It is cost neutral to the council, which will borrow the money for it.

Council sustainability adviser Maria Ioannou said the scheme was open to all property owners, but it was difficult to know how popular it would be.

"We're really interested to see what the uptake is like.

"We're not quite sure who will take it up, and we're particularly interested to see if landlords [do]."

The interest rate on the council loans was higher than people might get on a mortgage, for example, so uptake would depend on whether people felt they could afford it.

Assuming some things, a $5000 loan, for example, would end up costing the homeowner about $7510, including GST, she said.

That meant the annual targeted rate on that ratepayer would be $751 a year for 10 years.

To be eligible for an advance, people would have to apply first through the Energy Efficiency and Conservation Authority for energywise funding.

Once that funding was approved, the person could apply, via a form available from the council or on its website, for the money from the council for the remainder of the costs, up to $5000, including administration and GST costs of about $700.

The council's finance team would assess the applications - the main proviso being that people were up to date on their rates - and pay the provider directly the amount approved.

It was expected the full amounts applied for would be covered, but the trial was limited to 500 properties.

The targeted rate would go on the property's Land Information Memorandum and would have to be part of sale negotiations if the property was sold during the 10-year repayment period.

How that played out would be part of the assessment at the end of the trial, Ms Ioannou said.

Dunedin Mayor Dave Cull said the council was pleased to be trialling the initiative, which should go a long way towards improving the quality of Dunedin's housing.

"We will be keeping a close eye on the uptake of the scheme."

debbie.porteous@odt.co.nz