Does Asymmetric Information in Residential Rental Markets Lead to an Energy Efficiency Gap?


Dec. 12, 2013

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Erica Meyers, University of California, Berkeley

This paper explores whether there are energy cost information asymmetries between landlords and tenants. If tenants are uninformed about energy costs, landlords cannot capitalize energy efficiency investments into higher rents, leading to under-investment. I exploit variation in energy costs in the form of relative heating fuel price changes in the northeastern United States where some units heat with oil and some units heat with natural gas. I find that changes in energy costs are capitalized into rents when landlords pay for energy, suggesting landlords are informed about their costs. In contrast, when tenants pay for energy, I cannot reject zero capitalization, which implies tenants lack information. Turnover, owner occupancy rates, and energy efficiency investments are also different between the two payment regimes in ways consistent with asymmetric information.

Thursday, December 12, 2013
12:00 - 1:30 p.m. A light lunch will be provided.

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