Split Incentives Hinder EE Improvements for Rentals

The Energy Efficiency Problem Created by Split Incentives

GreenTech Efficiency, August 5, 2014

Admit it: when someone else is paying for something, doesn’t it make you want to consume more?

Perhaps you order that fancy dessert or an extra bottle of wine when your friend takes you out to dinner. Or you maybe you binge-watch HBO in your hotel room. It’s easy to keep consuming when you don’t have to pay the full cost.

And that’s exactly what people who don’t have to pay their own utility bills do as well.

WegoWise, a startup that remotely analyzes building energy consumption, wanted to know how much more energy apartment-dwellers consume when they don’t have to directly pay their bill. The company looked at 3,000 multifamily and affordable housing units throughout Massachusetts and found that tenants used 30 percent more BTUs per square foot when landlords had to pay the bills. The firm also found that annual utility costs for landlords were 20 percent higher than when tenants directly paid the bills.

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