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Most acknowledge the advantages of conservation over new energy development: low capital costs, minimal environmental impacts, stimulation of employment, simplicity, and • -.- • -.- -. -., effectiveness. However, significant institutional stumbling blocks lie in the road to increased energy efficiency, an~ one of the largest • • • -.- is the issue of weatherization in rental housing. T -.-- -. The Problem of Rental Housing It is often assumed that the economical, rational homeowner will • -. • assure a transition to a conserving future. Even if this were so, this --.- •--.- • view neglects the fact that 35% of the country's homes are occupied -.- •-.- •--. by tenants, not homeowners, and this is the stumbling block. The ... -.- -. economic issue for homeowners is straightforward: those who pay for conservation measures benefit in decreased energy bills-they • • • • • • I -.-- -.-- have incentive to conserve. In contrast, tenants present a case of • -.- split incentives : property owners who would pay for conservation • • • • • • • • • • • -.- • • -.-- -.- -.--. -.-" ·measures often don't directly benefit, and the tenants who would directly benefit are too transitory to put money into a landlord's property. When tenants purchase energy, the situation is easy to understand. With conservation, tenants benefit from lowered utility bills and increased living comfort. However, tenants seldom control their length or conditions of occupancy. It is unrealistic to expect tenants to invest in improvements to another's property when they cannot be assured that they will occupy it long enough to recover their costs. No incentive program for renters short of a grant overcomes this problem . Less well understood is the situation in which the landlord pays the utility bills. These owners have an incentive to conserve, but the incentive is much less than it first appears. Much rental property is held for tax and investment purposes, not for income. Owners of investment property generally attempt to minimize their out-ofpocket expenses, and avoid outlays which yield a low return. In addition, a landlord's income from rental property is treated as business income for tax pu rposes, and energy purchases are regarded as business expenses that can be deducted. Due to rapid depreciation, most rental property is sold every five • • • -, years. In practice, the payback periods for many conservation me sures are longer than the average length of ownership of the property, These two factors mean that few consel"vation measures will .lI .. • • • appear economically attractive to landlords, even for those who pay • • • •-.- • -. •-.- -.- -.- -.- -. -. the energy bills. Incentives alone cannot be expected to have a sig • nificant effect on rental weatherization ; market forces will bypass • • • • • . -. • • • • • • • -. • • energy effiCIency in rental properties.
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