The impact of minimum energy efficiency standards on the private rental market

The decarbonisation of the built environment constitutes a critical frontier in global climate mitigation, yet it presents substantial challenges within the Private Rental Sector (PRS), where the “split incentive” problem results in landlords bearing the upfront costs of energy retrofits while tenants capture both economic benefits, such as reduced energy bills, and non-economic benefits, including improved thermal comfort, indoor air quality, and wellbeing. This study examines the economic effects of the UK's Minimum Energy Efficiency Standards (MEES), which restrict the ability of landlords to let out properties with the lowest two Energy Performance Certificate (EPC) ratings, F and G. Using a uniquely comprehensive dataset linking over 520,000 rental listings with seven million property sales records, we employ a dual empirical strategy combining an EPC index-based Difference-in-Differences framework with a sharp Regression Discontinuity Design. The results reveal no statistically significant impact on rents for F-G rated properties and no spillover effects for potentially “next-in-line” D and E-rated properties. Large-sample evidence further indicates a slight increase in PRS property sales relative to other housing tenures following the implementation of MEES. These findings suggest that MEES has successfully driven improvements in building energy efficiency without inducing rent inflation and has exerted only a minimal effect on aggregate PRS supply, providing critical insights for the design of policies aimed at achieving net-zero targets in rental housing markets.