Split-incentives in energy efficiency investments? Evidence from rental housing

Abstract

Rental housing, where tenants are responsible for their own energy bills but landlords are responsible for the dwelling’s energy performance, may pose a particular challenge for investments in energy efficiency. In this paper, we describe the severity of this split-incentive problem by comparing homes purchased for own use with those rented out on the German housing market, where the share of renters is particularly high and the majority of rented apartments is owned by private individuals. Using data on energy performance scores from Germany’s largest online housing market platform between 2019 and 2021, we find on average economically small differences in the energy efficiency levels between apartments that differ by tenure type. Even though there are heterogeneous effects, also across broker types, by and large, our findings suggest that there may not be a critical energy efficiency deficit in the German multi apartment building sector.