Generally, residential tenants do not invest in energy efficiency, as the upkeep of
rental properties is usually the landlord’s responsibility. This research, which is
based on a survey of tenants, finds that up to half of rental tenants are willing to
pay more for properties with higher levels of energy efficiency. Of rental tenants
willing to pay for better energy efficiency, on average they are willing to pay €38
per month extra in rent for a 1-grade improvement in the 15-grade Building
Energy Rating (BER) scale for their existing rental properties. How much extra
rent tenants are willing to pay varies across a number of circumstances but the
factor that had the largest impact is information; information related to BER
ratings and the potential savings in energy costs associated with better BER
grades.
Information on the BER rating scheme and the associated potential energy cost
savings have two impacts on tenants’ willingness to pay for energy efficiency
improvements. First, with additional information explaining BERs, including what
a BER rating measures and how much a grade improvement along the BER scale
can affect energy costs more tenants were willing to pay additional rent for
energy efficiency improvements, rising from 38% of our survey sample to 55%.
Second, the extra rent that tenants were willing to pay for a 1-grade BER
improvement declined from €47/month to €38/month. This decline in
willingness to pay occurs even among respondents that were willing to pay an
additional rent of €47/month prior to learning more about BERs and associated
potential energy cost savings. So, a higher proportion of tenants were willing to
pay some extra rent for energy efficiency improvements but the amount that
they are willing to pay declines, on average. This reduction in willingness to pay
implies that in the absence of a good understanding of the potential energy cost savings associated with BER improvements tenants overvalue energy efficiency labels.
A substantial minority of tenants are unwilling to pay additional rent for energy efficiency improvements, between 45% and 62% in our sample. The predominant reason tenants indicated why they were unwilling to pay was that they could not afford higher rents. This reflects the current property market in Ireland with high rental rates.
When the extra rent that tenants are willing to pay is compared to the cost of associated energy efficiency improvements, the investment payback periods for most retrofit types (e.g. attic and cavity wall insulation, heating system upgrades) are relatively short. For the most energy inefficient properties (BER grades D-G) the investment payback periods are between 1 – 3 years when the Sustainable Energy Authority’s (SEAI) energy efficiency retrofit grant is included, whereas the payback period of more energy efficient properties (BER grades A-C) averages between 2 – 4 years. Payback periods for retrofits comprising external wall insulation or solar panels are substantially longer
