The relationship between housing market dynamics and energy efficiency improvements is gaining attention as governments seek sustainable urban development. The structure of residential property markets influences the rate and extent of renovations aimed at reducing energy consumption. In markets with high owner-occupation rates, incentives for long-term investments like insulation, efficient heating systems, or window upgrades are generally stronger. Conversely, in rental-dominated sectors, split incentives between landlords and tenants often hinder such upgrades, as landlords may not benefit from lower utility bills while tenants are reluctant to invest in properties they do not own. Policy interventions, including subsidies, tax incentives, and mandatory energy performance standards, have shown varying degrees of success in overcoming these barriers. Empirical evidence suggests that well-designed regulations combined with financial support can significantly increase renovation rates, particularly in older housing stock. However, the effectiveness of these measures depends on local market conditions, regulatory enforcement, and access to affordable financing.
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Housing market structure and energy efficiency renovations CEPR