Green Rental Agreements (GRAs)
With around 4.6 million (19%) privately rented homes in the UK, fostering an energy efficient private rental sector is crucial – not only for decarbonising the UK’s homes, but to ensure that tenants can live in comfortable, affordable homes.
The private rental sector faces significant, but surmountable barriers to energy efficient home upgrades. Division between a property owner and occupant adds complexity in motivating landlords to invest in energy efficiency upgrades for a home. Since tenants are usually responsible for energy bills and would reap the benefits of reduced costs, landlords may not directly benefit from the energy savings that could offset the expenses of home improvements. This split incentive dynamic reflects a key barrier to incentivising investment in energy efficiency within the private rental sector.
The role of Green Rental Agreements (GRAs)
GRAs are designed to tackle the split incentive dynamic between landlords and tenants when it comes to investing in energy-efficient homes. By integrating the running costs of a home into a unified “warm rent” package, landlords can directly benefit from energy savings. This consistent funding stream can support offsetting the expenses associated with investing in home upgrades for energy efficiency. In doing so, a GRA not only incentivises landlords to invest in green upgrades but also ensures that tenants benefit from reduced energy costs, creating a mutually beneficial arrangement.
GRAs offer tenants cost security, while providing the landlord with repayment security. With increasing public interest in climate and energy costs, a GRA may be appealing to prospective tenants and increase a property’s rental appeal.
The GFI has collaborated with valued experts to develop a Green Rental Agreement template and demonstrator solution. This initiative is designed to assist landlords in enhancing the energy efficiency of their properties.
