Do renters skimp on energy efficiency during economic recessions? Evidence from Northeast Scotland
Section snippets
Background
Targets were set by the Climate Change (Scotland) Act 2009 to reduce greenhouse gas emissions substantially.1 As greenhouse gas emissions from the housing sector account for around a quarter of Scotland's total emissions [1], making homes more energy efficient has been a key focus of the government policy. While new housing constructions are subject to building standards, older buildings in the
Case study area
Located in the northeast of Scotland, Aberdeen city and Shire are the home to more than 400,000 residents. Due to its proximity to the North Sea oil fields, the region is also a hub for many large oil and gas companies and their supporting services, thus earns its name as the “Europe's oil capital”. The local economy is heavily reliant on the oil and gas sector: it accounts for more than 20% of the employment and more than half of the total turnover [39]. As a result of the recent turmoil in
Data
Transaction data of private residential property leases from the Aberdeen Solicitors Property Centre (ASPC) was obtained on the basis of a non-disclosure agreement between the University of Aberdeen and the ASPC. The datasets record properties marketed as “to let” in the housing market area defined by the local authorities in Aberdeen and Aberdeenshire (see Fig. 2) from 1985Q3 to date (2017Q3).
Due to the availability of EPC ratings (details see Section 3.2), lease data includes 13,197
Models
In line with existing studies [16,17,43], we use hedonic regressions to examine the relations between rents and energy performance. There are four specifications for the models used in this study. The first specification is a baseline log-linear hedonic model (Model 1) which is presented in Eq. (1):where is the natural logarithm of the realised annual rent for property i. is a vector of the explanatory variables for the property attributes, including
Results
Table 3, Table 4, Table 5 show hedonic regression results for rents under each model specification. All models have an explanatory power of around 80%. The variation in number of transactions is due to missing values of variables related to EPC and postcodes. In Model 1, most of the estimated effects of house attributes on rent are as expected (for example, an additional public room, a bedroom, a cloak room or a bathroom yields significantly positive coefficients on annual rents), and the
Discussion and conclusion
Split-incentives have been perceived as one of the major hurdles of improving energy performance of dwellings in the PRS. While the existing studies tend to compare energy expenditure between tenants and owner-occupiers to indicate the presence of the issue, we argue that a more direct way to investigate the presence of split-incentive issue is through the study of tenants' WTP for more energy efficient homes. Such WTP could be in the form of rent premium. In the light of psychological studies,
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