Monday 6 January

Unrentable and Unsellable: How Energy Performance Certification Impacts the Real-Estate Market

Wanying (Amanada) Chen – Associate Professor at Zhejiang Gongshang University

Abstract:

Le Parisien reported an incredible collapse of the rental supply of real estate in Paris in 2024. Between January 2021 and September 2024, the rental supply decreased by 55%, while demand increased by 100%. Regulators are increasingly considering Energy Performance Certification (EPC) to enhance building efficiency and reduce real-estate-related emissions. These building certifications have left some properties with low ratings (“unrentable properties”) vacant. To return to the rental market, landlords of such properties must renovate extensively, a decision they may delay for financial rationales.

We present analytic models rationalizing the existence of unrentable properties based on notions from the theory of investment under uncertainty. The model focuses on a (representative) landlord who owns an apartment that is unrentable because it does not abide by current energy performance standards. The landlords may renovate incrementally or extensively in anticipation of further regulation tightening. We also examine the regulator’s decision about the best instruments to promote more energy-efficient rental space, either a vacant tax or more stringent performance standards.

Registration, please contact robin@em-lyon.com

Room B3-103, Lyon campus