Is the split incentive problem worse for college student renters: an analysis of landlord self-reported and hypothetical choices?

Abstract

In the residential housing sector, energy conservation issues may arise in the relationship between landlords and renters (a.k.a. tenants) due to principal-agent and information problems. An example is the split incentive, where one party makes the energy efficiency decisions while the other pays the energy bill. Herein, we investigate whether the landlord and renter split incentive problem may be more likely and more challenging for college student renters than those who are not college students. This may occur from landlords perceiving that college renters lack sufficient demand for energy efficient improvements.

There is a lack of studies regarding the possibility that college renters may face greater exposure to the split incentive problem. We surveyed landlords to better understand their prior energy efficiency investment decisions and used a contingent valuation question to further investigate their choices for a hypothetical return on investment scenario. The landlords had various mixes of college students and non-students in their properties. Landlords renting one single-family property exclusively to college students had, on average, completed fewer major upgrades to their rental properties and were less likely to invest in a hypothetical insulation upgrade.