Rental tenants’ willingness-to-pay for improved energy efficiency and payback periods for landlords

May 29, 2018

Energy Efficiency, Vol. 11, Issue 8, December 2018, pp. 2033–2056

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 AC38 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 willingnessto- 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.