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Stars and standards: Energy efficiency in rental markets

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  • Burfurd, Ingrid
  • Gangadharan, Lata
  • Nemes, Veronika

Abstract

Evidence suggests that rental properties are often associated with lower levels of energy efficiency than owner-occupied buildings. Policy makers are increasingly concerned about this energy efficiency gap. In this paper, we investigate the energy investments made and the market efficiency gains associated with different policy interventions at the point of lease. We introduce key features of the housing rental market in the laboratory and examine four policy options: mandatory information on energy efficiency, voluntary information, mandatory minimum standards, and a ‘cost-share’ treatment (i.e., landlords pay a share of the tenants’ energy bill). We find that enabling landlords to post the energy efficiency of their properties increases investment in energy efficiency. Voluntary information achieves efficiency levels comparable to those under a mandatory programme but may lead to lower levels of tenant participation. Mandatory minimum standards lead to higher investments in energy efficiency, but also reduce the number of properties available for lease. Cost-sharing leads to low market efficiency levels, perhaps due to the uncertainty landlords face regarding the energy bill of their tenants.

Suggested Citation

  • Burfurd, Ingrid & Gangadharan, Lata & Nemes, Veronika, 2012. "Stars and standards: Energy efficiency in rental markets," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 153-168.
    • Handle: RePEc:eee:jeeman:v:64:y:2012:i:2:p:153-168
    DOI: 10.1016/j.jeem.2012.05.002
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    5. Louis-Gaëtan Giraudet & Sébastien Houde, 2014. "Double moral hazard and the energy efficiency gap," Working Papers hal-01016109, HAL.
    6. Wrigley, Koel & Crawford, Robert H., 2017. "Identifying policy solutions for improving the energy efficiency of rental properties," Energy Policy, Elsevier, vol. 108(C), pages 369-378.
    7. Hope, Alexander John & Booth, Alexander, 2014. "Attitudes and behaviours of private sector landlords towards the energy efficiency of tenanted homes," Energy Policy, Elsevier, vol. 75(C), pages 369-378.
    8. Karel Doubravský & Alena Kocmanová & Mirko Dohnal, 2018. "Analysis of Sustainability Decision Trees Generated by Qualitative Models Based on Equationless Heuristics," Sustainability, MDPI, vol. 10(7), pages 1-18, July.
    9. Louis-Gaëtan Giraudet & S. Houde, 2013. "Double moral hazard and the energy efficiency gap," Post-Print hal-00799725, HAL.
    10. Kiet T. Nguyen, 2020. "Formal versus Informal System to Mitigate Non‐point Source Pollution: An Experimental Investigation," Journal of Agricultural Economics, Wiley Blackwell, vol. 71(3), pages 838-852, September.
    11. Fuerst, Franz & Oikarinen, Elias & Harjunen, Oskari, 2016. "Green signalling effects in the market for energy-efficient residential buildings," Applied Energy, Elsevier, vol. 180(C), pages 560-571.
    12. Im, Jongho & Seo, Youngme & Cetin, Kristen S. & Singh, Jasmeet, 2017. "Energy efficiency in U.S. residential rental housing: Adoption rates and impact on rent," Applied Energy, Elsevier, vol. 205(C), pages 1021-1033.
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