Sonia Rani--Public Policy Intern
Renters tend to think price and location in deciding on a unit to rent. Should utility bills be a concern as well? Utility bills for a family of 4 can easily run around $2,000 per year. Meanwhile, the major appliances in your home – dishwashers, refrigerators, microwaves, clothes washers/dryers – account for a large portion of your monthly utility bill. If these appliances are more than a decade old, they’re likely gobbling up a lot more energy than you might know.
A ten-year-old refrigerator runs a home, on average, about $200 per year, while a new Energy Star refrigerator lowers that cost to about $50. That means old fridges have the ability to cost you $150 in a single year! (Vance Air Force Base News)
So, are you ready to make that hefty investment to a new $1000 Energy Star refrigerator? Probably not. As a renter, it is much cheaper not to invest in new appliances than it is to run old ones that may be inefficient. Though people ideally like to save money and energy, buying new appliances would cost renters far more than one year of utility bills. On the flipside, landlords have no incentive to provide newer energy saving appliances as it is the renter that generally pays utility bills; the landlord doesn’t recover any of the savings.
This is what economists refer to as a “split incentive” problem. Minnesota 2020, a Twin Cities public policy advocacy group, seeks to solve this split incentive by proposing several solution options. A recent report suggests;
- Customized rebates to landlords that could help them bear the costs of the new appliances. This money could come either in the form of a rental industry tax break from the state, or from the funds utility companies are required to set aside for energy efficiency work.
- No-interest loans that would allow renters to pay for new appliances through their electric bill bit-by-bit every month. The added cost on the bill would be capped at 90 percent of the monthly energy savings, so the renter would see a stable or slightly lower bill. If the renter moved the cost would stay with the apartment until the loan was paid back.
- A new state law that would require landlords to disclose the average monthly energy costs for each apartment before the renter signs a lease. That would add “market incentives” to encourage landlords to consider energy efficiency in order to make their units more attractive — renters would seek out units with lower monthly costs. (Duluth News Tribune)
If a concrete solution could be implemented, renters could see lower bills, and landlords who offered units with new energy saving appliances could appear more attractive to prospective renters. However, the bottom line is that energy savings could be significant; replacing refrigerators that are older than 10 years in Twin Cities rental units would save enough electricity to power more than 3,000 homes every year. (MPR News)
It would be a win-win-win situation, and what’s not to like about that?
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