Rental tenants’ willingness-to-pay for improved energy efficiency and payback periods for landlords
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Throughout the developed world, residential buildings in the rental sector exhibit lower levels of energy efficiency than the owner-occupied building stock. This study estimates Irish rental tenants’ willingness-to-pay for energy efficiency improvements. A double-bounded dichotomous choice contingent valuation method is used to examine how much renters are willing to pay in their monthly rent for improved energy efficiency, measured via energy performance certificates. Using an administrative dataset from a grant scheme for residential energy efficiency retrofits, we examine the upfront cost to landlords of engaging in energy efficiency retrofits and calculate associated payback periods. Tenants in Ireland are willing to pay an average of €38 for a one-grade improvement along a 15-point energy performance certificate scale. Providing additional information about energy performance certificates and the potential impact on energy costs reduced mean willingness-to-pay, implying that in the absence of information tenants overvalued energy efficiency labels. Based on tenants’ willingness-to-pay, investment payback periods for attic and cavity wall insulation are relatively short but prohibitively long for external wall insulation and solar heating retrofits.
KeywordsWillingness-to-pay Rental markets Double-bounded contingent valuation Energy performance certificates
We acknowledge the Sustainable Energy Authority of Ireland for access to the anonymous dataset of Better Energy Homes scheme applications. This research has been financially supported by the Sustainable Energy Authority of Ireland and ESRI’s Energy Policy Research Centre.
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