Energy efficiency diagnosis (EED) to stimulate the renovation of the private rental market: useful, but not miraculous

Renovation of rental housing is an important task in the fight against climate change. Everyone has heard about recent measures aimed at eliminating "energy grids," that is, objects classified as the most energy-consuming (F and G) according to the results of energy audits (DPE), a tool for calculating the energy efficiency of housing. This tool reflects modern environmental policy practice based on regulation. Its results today determine the possibility of increasing rent or renting out the property on a permanent basis for the landlord..

The private rental housing market is coming to the forefront.

Since it has the highest number of energetically non-compliant objects: 30.5% of energy grids are in this segment. Therefore, the government views private property owners and landlords as potential participants in energy renovation in this area. However, the diversity of these owners is still not well characterized, while it directly affects their response to environmental policies focused on DPE. Some of them will respond positively through energy renovation projects, but others may not be able to meet regulatory requirements or may prefer other solutions to add value to their properties (short-term rentals, vacant housing, renting without a legal contract...). Insulation work plays a crucial role in the energy renovation of buildings.

Study of landlord profiles

To better understand the positive or, conversely, counterproductive effects of this diversity, a recent study conducted by the International Center for Environmental Research and Development (CIRED) as part of the PREMOCLASSE research project examined how these landlords approach energy renovation in France. The study identified 10 profiles of private landlords, their resources, skills, and specific rental practices, which will respond differently to the tightening requirements surrounding the DPE. The research shows that half of these profiles are likely to respond to these requirements through energy renovation work, while the other half is uncertain about the consequences or is considering exiting the rental market permanently. This indicates that the tightening of requirements could have significant implications for this market, potentially excluding some landlords, properties, or tenants. The study was based on 45 interviews with private landlords in France, conducted in the spring of 2022, before the regulatory calendar came into effect. These landlords were primarily recruited through social networks (blogs, Facebook groups for landlords).

Diversity of landlord profiles

The profiles indicate a diversity of strategies and ways to be a property owner-landlord. Four profiles pursue one or more economic goals, such as profit generation, short-term profitability, cash flow, or additional income. These include professional property owners, workers seeking economic independence, active heirs, and popular investors. The other four profiles deviate from these economic rationalities. Although financial contribution is often the primary reason for renting out, it serves another purpose - for example, limiting losses associated with life risks, creating or preserving inherited wealth, or developing secondary activities - and opens up opportunities for a different approach to tenants, property, its maintenance, work, and renovation. These are construction professionals, casual low-income renters, hereditary landlords, and conservatives. Finally, there are two profiles that seem to be economically oriented types facing increasing demands placed on rental activities (disillusioned with real estate, real estate retirees).

Distribution of resources among landlord profiles

These differences are based on the unequal distribution of resources among landlord profiles. They are observed in the financial sphere, networks, and knowledge, including technical knowledge. In the financial sphere, some landlords have their own funds or strong borrowing and saving capabilities: this allows them to purchase real estate outright or self-finance renovations, while others heavily rely on loans. In terms of networks and technical knowledge, some landlords have access to friendly or professional networks. These connections provide advice and skills.

The approach of landlords to their property and energy renovation

The way landlords approach their properties determines the possibilities for energy renovation. For some (real estate professionals), buying (renovated "good deals") or selling is the main mechanism for changing their portfolio. Renovation work (often not energy-related at the time of the survey) is carried out upon purchase. These landlords can approach relocation-renovations (i.e., work done as part of relocating - buying or selling - real estate) in dynamic and relatively short timeframes thanks to their networks and the fact that they do this without assistance. For others, property management (active heirs, inherited landlords) is a continuation of efforts aimed at quality renovation to keep the property in the rental market. Between these two poles, there is quite a wide range of profiles (economic independence, popular investors, construction professionals, casual low-income tenants, disillusioned with real estate) characterized by low portfolio variability.

Reactions of landlords to DPE

DPE, between real effects and perceived limitations. Landlord profiles exhibit very different levels of knowledge and consideration of DPE. Only one profile shows genuine interest and value in this tool (inherited landlords). Most other profiles are critical of it while remaining attentive. Finally, three profiles are both critical of DPE and do not take it into account when making decisions (real estate professionals, conservatives, disillusioned with real estate). The main criticism directed at DPE is its lack of significance, especially regarding work recommendations. It is seen as an administrative constraint. There is a sense of concern about regulatory instability, which could impose new requirements on economic models at any moment. Ultimately, the strengthening of DPE and regulatory requirements may only change renovation practices for half of the profiles. It creates uncertainty about the future of real estate for three profiles (random low-income tenants, popular investors, construction professionals), for whom assistance programs will be crucial. It also means landlords exiting the rental market and changing properties for two profiles (conservatives, disillusioned with real estate). Its effects will vary significantly depending on landlord profiles and, indirectly, tenants.

The impact on tenants and the redistribution of property

Redistribution, concentration, or "renovation" affects not only landlords but also tenants. In general, it will be more difficult to absorb the costs of energy renovation in areas with low real estate prices compared to the costs of renovation. This risk of territorial disparity is associated with a social aspect. Among the profiles focused on low-income tenants—professional property owners, popular investors, hereditary landlords, conservatives—only two profiles seem capable of providing a sustainable supply of low-rent housing: professional property owners and hereditary landlords. Finally, some landlords are discussing the possibility of switching to other rental methods (unregistered, short-term). This could exclude vulnerable tenants from the rental market without addressing the issue of energy renovation, as it means leaving the property in its current state.