Energy Performance of Rented Dwelling: If You Can Dream It…

Abstract

The energy performance of rented dwellings is a crucial aspect of energy policy in the Walloon region in Belgium, where one quarter of households are tenants on the private market. The paper deals with the imperfect information problem that concerns the energy performance certificates (EPCs) and its impact on rental market. Four aspects of the problem reported in the literature are discussed, namely: 1) different energy evaluations of the same dwelling; 2) performance gap between theoretically estimated and real energy consumption; 3) insufficient coverage of the rental market by EPCs; 4) often weak appreciation of official EPCs on the rental market. The originality of the paper is that it compares the official EPC labels with the labels reported by tenants in a recent survey (N=2.892). While an existing EPC is often unknown for tenants, their awareness depends on the households’ socio-economic characteristics. Four groups of tenants are distinguished: those with correct answers, “dreamers” overestimating their energy performance, “complainers” underestimating their energy performance, and “indifferent” tenants who don’t know the existing label. The differences between groups are analyzed with descriptive statistics and a discrete choice model. According to the hedonic regression, the impact of an official EPC on housing rents varies for households with different perceptions of energy performance. In particular, the “dreamers” more severely penalize the worst energy classes, while the “indifferent” tenants a bit undervalue good EPCs and a bit overvalue bad EPCs. The indifference concerning the EPC slows down a progressive introduction of the impact of the energy performance on a residential rental market. In a policy context, the availability of a clear information on EPC for all tenants is an important condition of the functioning of the residential rental market in a manner that stimulates the renovation of old housing stock and the maintenance of high energy standards.