Improving building energy efficiency is widely recognised as one of the best strategies for combating climate change in the UK. Yet, uptake of energy efficiency has been slow due to a number of practical barriers, and few building sectors face higher hurdles to energy efficiency than the private rented sector. This sector offers a flexible form of tenure and contributes to increased labour mobility in major cities across UK. It is also the tenure of choice for low-income families and young people moving into cities. However, private rented properties are often poorly insulated and with ever increasing energy prices, renters are increasingly finding themselves trapped spending a significant share of their income on energy bills, (Citizens Advice 2014).
Upgrading a property to an energy efficient level would potentially bring down energy bills. Yet, in many rental arrangements, tenants pay rent to their landlord, but are responsible for paying their own utility bills and there is thus no a priori incentive for the homeowner to bear the upfront costs of energy efficiency measures. This gives rise to the issue of split incentive between homeowners and their tenants, a critical barrier to uptake of energy efficiency in the private rented sector. Furthermore, private rented homes shelter a large number of households in fuel poverty and are often poorly insulated to the point of being a health hazard because the occupants are unable to afford the high energy consumption needed to heat these dwellings to a decent temperature. Better financing of energy retrofits would potentially reduce fuel poverty in the rental market, especially among elderly tenants.