Inefficient markets for energy efficiency? – The efficiency premium puzzle in the German rental housing market

Lisa Sieger and Christoph Weber

Energy Policy, 2023, vol. 183, issue C

Abstract: On the market where prospective renters meet dwelling offers, competitive forces and rational behavior on both sides would imply that the monthly basic rent should reflect differences in expected monthly heating costs – other things being equal. We test this hypothesis by specifying a hedonic price model reflecting a total-cost-of-renting perspective. Drawing on 844,229 apartment listings for rent from 2014 to 2020 on a small spatial scale, we find a premium for more energy-efficient apartments; however, it is rather small. If the energy performance score decreases by 10 kWh/m2a, the monthly basic rent increases, on average, by roughly €0.01 per square meter living area. The expected energy cost savings thereby exceed the premium by a factor of three to seven. Rather, we find discounts of up to 9.2 % if apartments use heating technologies that are known to be inefficient. We explore various explanations for these outcomes, considering both landlord and renter behavior.

Keywords: Energy efficiency; Residential buildings; Rental market; Valuation gap; Hedonic analysis; Heating technology (search for similar items in EconPapers)
JEL-codes: C21 Q40 R21 R31 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:183:y:2023:i:c:s0301421523004044

DOI: 10.1016/j.enpol.2023.113819

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