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Rents as incentive for saving energy: an empirical analysis for Austria Gunther Maier, Philipp Kaufmann, Andreas Oberhuber
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Untertitel - hier einfügen Overview Introduction: The need to save energy in the housing sector The economics: landlords, tenants and investments in energy efficiency The Austrian context: rent control and improvement funds The empirical evidence: heating costs in hedonic rent equations Summary
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Untertitel - hier einfügen Introduction About 1/3 of energy is used for buildings In Austria, 28.1% used for heating and cooling of rooms Kyoto Austria agreed to reduce energy use in the building sector by 28.1% (relative to 1990) Actual increase by 4.7% Slow adjustment process Long lifetime of buildings, slow rate of replacement Buildings built today determine energy use for the next 20-30 years
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Untertitel - hier einfügen Introduction Reduction of energy consumption in buildings is urgently needed How can this be achieved? Regulations Investment subsidies Market incentives How do market incentives work in the current structure?
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Untertitel - hier einfügen Economics Energy consumptions in buildings is determined by various actors Energy provider: supplies energy in the requested form, paid by tenant Landlord: rents the appartment to the tenant, decides about investments into the energy efficiency of the building (insulation, windows) Tenant: pays rent to the landlord, decides about energy use (heating patterns, room temperatures, ventilation) Government: sets and controls regulations, provides investment subsidies Limited transparency of costs of heating/cooling
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Untertitel - hier einfügen Economics Price of housing: P = rent + operation costs + cost of heating/cooling Relevant price for the tenant: P Relevant price for the landlord: rent Relevant price for the energy provider: cost of heating/cooling Tenant: tradeoff between „rent“ and „cost of heating/cooling“ willing to pay a higher rent for an appartment with lower costs of heating/cooling
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Untertitel - hier einfügen Economics incentive for landlord to invest in energy efficiency of the building: market incentive for investments in energy efficiency Does this mechanism exist in Austria? Empirical approach: Estimation of a hedonic price equation: r = f(X a, X b, X l, X c, h) h is expected to have a significant negative coefficient (market incentive works in the right direction)
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Untertitel - hier einfügen Austrian context Austrian housing market is highly regulated (MRG – rental law) Energy efficiency is not taken into account in these regulations Most important regulated areas: Protection against eviction Limitations of rent levels and rent increases
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Untertitel - hier einfügen Austrian context Four types of rent: 1.limited (low standard, 1.54 €/m2/month) 2.Guideline rent (good quality, old buildings, legally set base rent + additions – subtractions) 3.Appropriate rent (newer buildings, good quality, improved apartments; appropriateness can be checked by court) 4.Unregulated rent (newer buildings, no public support; negotiable)
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Untertitel - hier einfügen Austrian context Rent increases: In case of controlled rents, generally limited to CPI Temporary rent increases Under certain conditions Must be approved by public authorities Can be limited by court For improvement investments Funds cannot be used for other purposes In case of free rents, generally according to contract
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Untertitel - hier einfügen Empirical results Does an economic incentive prevail in this regulated market? Data EU-SLIC 2006 and 2007 for Austria (Statistik Austria) Household survey, 2 years, different numbers of variables Only rented residential property Only observations where rent is considered to be according to the market by the respondent dependent variable: (log of) rent (per m 2 ) net of heating costs Important independent variable: heating costs (per m 2 )
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Untertitel - hier einfügen Empirical results Categories of control variables: Fundamental appartment characteristics (size, size- squared, no.of rooms, availability of water, toilet, heating, garden, balcony, floor); 2006: 10; 2007: 28 variables Fundamental house characteristics (age, type); 2006: 11; 2007: 12 variables Locational characteristics (federal state, type of city, accessibility of bank, hospital, public park, shopping, etc., crime, noise); 2006: 15; 2007: 26 Characteristics of contract (limited, length of contract); 2006: 1; 2007: 2
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Untertitel - hier einfügen Empirical results 20062007 linearlogp. m2linearlogp. m2 Heating 0.461 (5.79) 0.001 (4.64) 0.340 (4.35) 0.210 (2.15) 0.009 (44.1) 0.175 (2.04) Controls 1/5/10% 9/3/29/3/411/2/57/12/73/6/712/9/6 R2R2 0.4890.4400.3080.4630.6890.304
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Untertitel - hier einfügen Summary and conclusions Estimations do not yield the expected significant negative coefficient – positive and significant Result is stable over years, specifications, and Market incentive works against improvements in energy efficiency Reason cannot be identified with this analysis Strict rent regulation Limited transparency (informational problem)
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