Association for Public Policy Analysis & Management

This research takes a deeper look at the role of income and lifestyle in driving energy consumption in urban residential rental households. Rental buildings have complicating factors in the energy consumption picture. First, the residential rental market faces the split incentive issue, known as principal-agent (or landlord-tenant) misalignment. Additionally, renters typically have limited allowance to make significant renovations or rehabilitations to leased property and less long-term investment than owners. Taken together, renters are likely to have a more individualistic attitude towards conservation measures. Extending this inquiry, this research asks: How effective is a high-performing green building if occupants have high incomes and little incentive to save (money or electricity)?

This question is explored in more detail by comparing the energy consumption patterns of two New York City residential buildings. Building 1 is a high-end luxury property rated LEED-Platinum by the United States Green Building Council. Building 2 is an EnergyStar rated affordable housing property for low-income residents. Data gathered include aggregate and household electricity data, surveys, and interviews with residents. Findings indicate that the residents of Building 1 consume consistently more electricity across a variety of metrics, despite apartments and households of similar size.

This work posits that a high level of organizational capacity at the building management level coupled with highly efficient green building features were not enough to override the high incomes and luxury amenities of Building 1 residents. Building 1 residents do not respond to weak price signals and live in highly consumptive spaces, leading to higher electricity use. The electricity bill places little burden on their monthly budget, allowing preferences for comfort and convenience to drive consumption. Building 2 residents are highly income-constrained; thus, they are more responsive to price-signals, and live in much less consumptive spaces due to the heavy burden the electricity bill places on their monthly budget. This illustrates that income as a predictor of consumption can override both highly efficient building features and highly centralized and controlled building operations at the organizational level.

These findings lead to two policy implications and one broader implication for practitioners and building designers. First, programs should be crafted to allow low-income residents more affordable access to energy efficient appliances and high performing buildings. Second, management organizations need to think more creatively about how to engage high-income residents in conservation efforts; if they are less likely to respond to price signals because of the low burden electricity places on income, mechanisms such as peer pressure or social media campaigns need to be considered. Finally, for practitioners and building designers more broadly, the role of green residential buildings should be carefully explored. Although green buildings offer many benefits beyond energy efficiency, they should not be viewed as the panacea for reducing consumption across the board among occupants. In particular, as these results indicate, if occupants have very high incomes, they may override any well-intentioned green features.