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Archive for February 2013

What your drafty house has in common with overpriced ballpark beer

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As I’m sitting paying my highest heating bill of the winter, next to the drafty window half-heartedly sealed with a layer of plastic, it’s easy to grouse about my landlord not springing for basic energy efficiency measures (Saran wrap on the windows — really?) that could cut our energy use dramatically. It turns out, though, that it’s not just my landlord.

A few months ago, Brad Plumer at the Washington Post and Matthew Wald at the New York Times both had posts looking at the problem of poor energy efficiency in rental units. Based on research by Lucas Davis at the Haas School of Business at UC Berkley, they show that like you might expect, homeowners are way more likely to make energy-saving investments that pay off in the long run. You really are paying way too much for energy at your rental apartment.

The problem isn’t that your landlord has it out for you. It’s called the “split incentive problem” (or the “landlord-tenant problem,” your choice), where who pays for energy is separate from the energy user. But that’s a really wonky term, so let’s put it in terms that are easier to relate to: alcohol.

You see, the typical rental house where the tenant pays for energy is sort of like buying beer at the ballpark. You end up paying way too much for low quality beer, so you try to make the drink last as long as possible, but what you end up with is a warm quarter cup of Bud Light by the fifth inning. Not a great experience. Similarly, you can turn your thermostat down to 66 degrees, but you’re still going to be paying way too much for energy when your house leaks like a sieve, has an outdated heating system, and a refrigerator from 1986.

On the other hand, when the landlord includes energy costs in the lease (common in commercial properties), you have a situation much closer to that producer of great decisions, the open bar. After you’ve paid your entrance fee — or gone in for free if you’ve really lucked out — every extra drink has a marginal cost of zero. With those terms even the most responsible drinker is likely to go back for just one more drink. Since they bear all the costs, in this scenario, your landlord is likely to act like frat houses do, those paragons of getting masses of people drunk cheaply, and serve you the energy efficiency equivalent of Natty Light or Keystone. The only difference here is that cheap is good.

frattylight

More similar to your landlord than you’d think

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Written by rethoughtblog

February 28, 2013 at 8:12 am