Energy efficiency retrofit in the European social housing stock and the split incentive paradox : A comparative behavioural study

Dobi-Rózsa, Anikó and Balaci, Adrian (2024) Energy efficiency retrofit in the European social housing stock and the split incentive paradox : A comparative behavioural study. ECONOMY AND FINANCE: ENGLISH-LANGUAGE EDITION OF GAZDASÁG ÉS PÉNZÜGY, 11 (4). pp. 393-418. ISSN 2415-9379

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Abstract

The social housing stock represents a considerable segment of the residential housing pool across Europe, as such, therefore, investing in its energy performance isof great importance. Furthermore, social housing provides affordable homes forthe economically vulnerable, which adds urgency to the issue. Yet despite the social and environmental targets European states have agreed upon, the split incentive paradox has led to a widespread failure in advancing energy efficiency in thesector. Taking a comparative behavioural approach, this study investigates thesocial housing sector in three European countries with different governance andrent-setting structures (representative of their respective regions) revealing distinct forms of split-incentive related market and behavioural failures. We find thefailures are most pronounced at the top of the social housing provision pyramid,where provider and tenant interests often clash, leading to inefficient policies andsuboptimal refurbishment rates. In terms of solutions, we find the split incentivechallenge is effectively addressed when rent setting allows retrofit cost recovery,tenants are involved in decisions and can carry forward energy efficiency benefitswhen they change residence. To this effect, the introduction of alternative costrecovery mechanisms is proposed, increasing the democratic legitimacy of theprocess through active tenant participation, and developing regulations that protect the tenants’confirmed rights post refurbishment.

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