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The Energy Efficiency Gap in the Rental Housing Market: It Takes Both Sides to Build a Bridge

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  • Xavier Lambin
  • Joachim Schleich
  • Corinne Faure

Abstract

We revisit the issue of the energy efficiency (EE) gap by explicitly acknowledging the two-sided nature of the rental housing market and two-sided asymmetries of information between tenants and landlords. Employing a theoretical matching model, we show that Energy Performance Certificates (EPCs) that signal a dwelling’s energy performance induce optimal EE investments by landlords only if tenants pay their energy expenditures in full. When landlords pay part of the energy expenditures, they seek tenants who will conserve energy. Our model shows that asymmetry of information over tenant characteristics results in suboptimally low investments in EE. This may even render EPCs counterproductive. As a remedy, we show that tenant-side signaling needs to be rolled out jointly with EPCs and may even be sufficient when contracts include energy expenditures. Data from an original survey provides support for these insights and suggests that information on the tenants’ side contributes to more EE investment.

Suggested Citation

  • Xavier Lambin & Joachim Schleich & Corinne Faure, 2023. "The Energy Efficiency Gap in the Rental Housing Market: It Takes Both Sides to Build a Bridge," The Energy Journal, , vol. 44(1), pages 75-92, January.
    • Handle: RePEc:sae:enejou:v:44:y:2023:i:1:p:75-92
    DOI: 10.5547/01956574.44.1.xlam
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    References listed on IDEAS

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    1. Kenneth Gillingham & Karen Palmer, 2014. "Bridging the Energy Efficiency Gap: Policy Insights from Economic Theory and Empirical Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(1), pages 18-38, January.
    2. Katrina Jessoe, Maya Papineau, and David Rapson, 2020. "Utilities Included: Split Incentives in Commercial Electricity Contracts," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5), pages 271-303.
    3. Schleich, Joachim & Gassmann, Xavier & Meissner, Thomas & Faure, Corinne, 2019. "A large-scale test of the effects of time discounting, risk aversion, loss aversion, and present bias on household adoption of energy-efficient technologies," Energy Economics, Elsevier, vol. 80(C), pages 377-393.
    4. Mailath, George J. & Postlewaite, Andrew & Samuelson, Larry, 2013. "Pricing and investments in matching markets," Theoretical Economics, Econometric Society, vol. 8(2), May.
    5. Anne Ray & Ruoniu Wang & Diep Nguyen & Jim Martinez & Nicholas Taylor & Jennison Kipp Searcy, 2019. "Household Energy Costs and the Housing Choice Voucher Program: Do Utility Allowances Pay the Bills?," Housing Policy Debate, Taylor & Francis Journals, vol. 29(4), pages 607-626, July.
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    Cited by:

    1. Leo Reutter, 2025. "Inefficient incentives for energy saving in tenancy law and policy options to remedy the landlord-tenant dilemma," European Journal of Law and Economics, Springer, vol. 59(1), pages 179-218, February.

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