UMD Study Highlights Rental Property Impacts on Higher Energy Use

Heidi Enninga
November 20, 2016 11:36 PM

In a student-rented house near campus, temporary plastic insulation covers the windows. 

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"All of the windows in our living room, the ones that open anyway, are going to be 'plastic-ed," Marissa Stein, a student at UMD explained. 

She and her three roommates hope it'll keep their utility bills in check as cold weather sets in. 

While, conserving energy or more extensive efficiency upgrades do mean lower bills, a UMD study, highlights how a "split incentive" means those energy-saving methods are less likely to be employed in rental properties.

Monica Haynes, director of UMD's Bureau of Business and Economics Research, authored the study and said the split incentive happens between the landlord and the tenant. 

"The two parties have different incentives for saving energy," Haynes said. "If the landlords are paying for the energy, then the tenants don't really have any incentive to save or conserve. Then if the tenants are paying, then the property is more likely to (have) leaky insulation, old appliances, all of those kinds of things."

The result in both scenarios is higher levels of wasted energy. The UMD research estimates that if the split was eliminated, landlords and tenants citywide could could save between $5 million and $14 million annually. 

In Duluth, the split is also exacerbated, according to Haynes. The study collected data from utility companies and surveyed landlords and tenants finding that the average age of rental properties is 98 year. That old housing stock is often more energy inefficient. 

"Our houses, especially rental properties are much older and even older than similar Minnesota cities," Haynes said. 

While the concept of a split incentive isn't new in the world of research, Haynes said many other findings were, including that students are at great risk for the split incentive. 

"Students are more likely to live in bigger properties with more bedrooms, older properties and they're also more likely to pay for their own utilities," Haynes said. "They really are often at a disadvantage in that respect." 

That's why the study looked for common incentives between tenants and student renters. The UMD sustainability office is also considering how the study results could inform a program for student renters and landlords. 

"I think (students) are a population that would really benefit from a program and it could be something that would really help save a lot of energy citywide," Haynes said. 

The research looked at ways that up-front investments like new insulation or furnaces would pay off for landlords. 

"Would tenants be willing to pay slightly more in their monthly rent if they were insured a monthly savings through their utility payments?" Haynes said. "We actually find that a lot of tenants, like 80 percent of tenants, we surveyed said they would be willing to pay more in rent if they would be able to save that same amount in utility payments 

The difficulty is getting that message across, especially as renters change. 

"For the landlords to raise their rent is a big risk, so to make sure the tenants are aware of why those changes are happening, why the rent might be increasing and that they can actually see the benefits in their savings," Haynes said. 

Another piece of the puzzle could be an education program for students. 

"Typically landlords in Duluth don't have a lot of trouble finding tenants, but what they do have is trouble finding responsible tenants who are going to be taking good care of the properties and conserving energy," Haynes said. "I think there is hope for a program that might include for example include an education aspect to find tenants that are responsible and smart and maybe have some sort of training or education."

Haynes said the options are still being considered, however, a program would likely need grant funding to happen. 

Read highlights of the study here.

Review the entire study here. 


Heidi Enninga

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