We are in the midst of a housing shortage and an energy crisis, which impacts rental properties in Ireland as most of these are pre-building regulations, especially in city centres. In fact, SEAI, as part of the development of the Strategy to Combat Energy Poverty 2016-19, estimated that 55% of private rented properties (circa. 179,600) had a BER rating of D or less, of which circa one in three is rated F or G (circa 59,900). A mere 124,000 are between are classed as a C.

Finally, out of the approximate 185,000 Irish homes which had a positive BER rating (ie, an A and/or B) just 22,854 were rental properties, making them only 12% of total A/B BER rated.

This clearly illustrates the poor energy efficiency across the private rental sector. It is the aim of this article to address some of the impediments to the energy efficiency improvement of rented homes versus private ownership homes, which is not only an Irish problem but a European one, as the residential sector accounted for almost 27% of the total energy consumption in the EU-27 countries in 2010 according to Eurostat.

The demographics of renting

According to CSO data, rented properties account for as high as 36% (in 2016) of housing stock in urban areas, with a continuous noticeable growing trend over the past couple of decades. The number of buildings for private rental stands at about 326,493 (20% of housing stock nationally).

The number of rentals has been increasing since the 1990s up to today, with no sign of abating due to increased immigration which, according to the OECD listings, Ireland be ranked seventh place in the group, with foreigners standing at 17% of the total population, of which 46% of them arrived in the past five years versus a 22% OECD average.

This sudden influx has been compounded by a substantial increase produced by the rate of house ownership decreasing since the 2008 crash, as it is now the lowest it has been since 1971 at 68% (and shrinking). Of these rents, HAP and RAS account for about 26% as there are 78,000 active HAP/RAS tenancies out of the approximate 300,000 registered tenancies in the rental market in Ireland in 2021 as outlined in R0712(I)PAC33.

The age demographic is also showing a marked increase in the age of renters, as many adults simply cannot afford to buy a house, being permanently locked into renting*. This is due to marked increases, as in 2020 the average young couple could have expected to allocate 23% of their disposable income to repaying the mortgage on their newly acquired home. This compares to about 15% at the end of the 1980s. To compound the problem, house prices have risen 230% vs 100% for wages in real terms. (Source: HousingEurope – Dara Turnbull).

Energy, environment and economics

Having stabilised the base group let us examine the energy consumed by this sector. Ireland consumes a total of 190TWh (190 billion kWh), and housing stock represents 23% of energy use, of which 20% is private rental and, of that, 61% is for heating; that makes a whopping 5.33 TWh.

If we assume a very conservative 25c per kWh for domestic residents, that equates to a minimum €1.333bn spent annually. Just upgrading the rental stock generally for anything below a BER rated C would potentially save a lot more than half a billion euro p.a.

Also, from an environmental perspective, this would help Ireland not only increase the quality of its building stock but also help in meeting the 2030 environmental targets and could be used to alleviate the hit the farming sector took on emissions by displacement. This is explained as existing inefficient buildings only generate greater emissions every year, contrary to farming, which generates extremely useful produce despite emissions.

To quantify it, with a kWh produced emissions for 2020 being 290g CO₂e/KWh (2021), that equates to 1.55 million tons of CO₂ that could be halved only by just dealing with the bottom 55% properties rated D or less mentioned previously. Despite farming representing 37.5 % of Irish CO₂ emissions versus 11.4% for residential (Source CSO), the impact would be more persistent as you obviously do not need to upgrade a building every year, so the savings have a rolling effect.

Regarding the costs of CO₂ emissions exclusively, current social costs per ton of CO2e is €51 (due to dollar-euro parity), this could represent a saving of circa €50m annually, although according to a recent study titled 'Comprehensive evidence implies a higher social cost of CO2 – Nature volume 610 (2022)', the current figure is undervalued as it should be closer to €185 per CO₂e/ton.

This would permanently reduce the total, which would go from the current 9.4 million tons to 7.85 million tons, thus reducing emissions by 16.5%.

And that is just doing a basic upgrade for the worst-performing properties. There is ample opportunity to improve even further. A driver of this can be that Ireland had the fifth highest emissions of greenhouse gases per capita in the EU in 2020 at 15.5 tonnes of carbon dioxide equivalent per capita (source Stadista). Ireland has been in the top five emitters of CO₂ e for more than five years.

However; currently there are many factors that influence inaction – especially in the rental sector – despite that, the Energy White paper, 'Ireland’s Transition to a Low Carbon Energy Future14' acknowledged that more extensive measures, such as deep retrofit of existing building stocks, are needed.

SEAI grants (and even if you include Revenue’s HRI for the 13.5% VAT) offer no incentive to landlords due to a lack of any tangible benefit, especially since they do not pay the energy bills. It is the renters – generally comprising low-to-mid income persons who cannot access the housing market – who pay the energy bills.

However; they cannot upgrade the building as they are excluded from the Better Energy Warmer Homes Scheme (BEWH). This makes them prone and sensitive to fuel poverty. This is especially brought to the fore by the Russia-Ukraine war, which shows how exposed fossil fuels are to great pricing fluctuations in a short space of time (graph below clearly illustrates this).

To soften the blow to customers of the current turmoil, Budget 2023 allowed a provision that domestic electricity customers would receive €600 credit to help reduce electricity bills and, knowing the number of connections in 2020 according to the CSO was 2.1 million, this makes 1.26 billion that will be a sunk cost with no benefit to it past the winter. The monies should be geared towards energy conservation instead.

The rental market and policies

While the government has introduced a new low-cost loan scheme in Budget 2023 (for residential retrofit as was outlined in the National Retrofit Plan) with loans at reduced interest rates to non-corporate landlords, this will most likely have a low uptake.

This is because, unfortunately, rent prices tend to be determined by total area, number of rooms and location, hence there is only a marginal incentive for a landlord to upgrade the thermal performance of the buildings contrary to the tenants. This is known as the ‘split incentive problem’.

It is to this end that tax relief could be used as a driver to incentivise the upgrading of the existing rental building stock. This could be done by comparing a property against a benchmark (adjusted for age) and offering a reduced taxation with regards to any improvement carried out.

Conservation (insulation and air tightness) should be a priority over active measures (new more efficient appliances, TRVs, radiator reflectors, etc.).This would produce an effect where the lesser BER rated properties will be refurbished thus producing a win-win where the landlord gets the benefit of a tax cut and the tenant reduces their bills and has increased comfort.

Tax relief must also allow for a capital increase in the value of the property offset against income tax should the increase be due to energy conservation. The government would still benefit from CGT when the property is divested.

In this example above which is very prevalent in rental market,  inadequate insulation leads to black mould (Aspergillus Niger) spots in this photo taken at wall to attic space, House BER rating is a D2 with an obvious cold bridge happening at the cavity closing before the attic space. Being in a bedroom will trigger asthma and allergic reactions with other health complications in the long term.

The carbon tax, which greatly affects tenants despite their very limited position to reduce their heating bills, could be partly also displaced to the landlords, as these can actually take active measures by owning better performing properties.

This could be done by paying a carbon levy based on square metres, with the worse-performing properties paying more based on the relative BER against an ‘age adjusted’ benchmark. These funds should be then redirected towards refurbishment.

To use an illustrative example, a 1950s house graded an F (>380kWh/ m²/yr) could be upgraded to a C3 (>200 kWh/m²/yr), thus ensuring a 48% jump in efficiency. The landlord could, ideally, be incentivised by a reduction in taxation on the rental income. The greater the improvement, the greater the tax relief. This would specifically favour the older properties as it is less onerous and costly to upgrade from E2 to E1 than from A2 to A1.

Renters in this example would experience a reduction in their bills of €45 per m² per annum (assuming 25c/kWh), so if the three-bed house was 1,100 sq ft (102 m²), that would be a saving of €4,600 annually. Then, after a set number of years (perhaps 10?), the average BER for 1950s houses could be updated to a higher one, say, a C3, and any house falling under that benchmark BER could have an extra taxation introduced…essentially a ‘stick and carrot’ process.

Inferring from the image above and now knowing that a mere 7% of properties are rated B or higher, it can be stated that most of the properties are pre-2006 with a lot more than half of them being pre-building regulations, with the newer ones going for private ownership.

What does this signify in economic terms? It basically indicates that, unfortunately, given the distribution of rental housing around poor BER ratings, it would indicate that there is a property trap for renters who are powerless to take active measures to improve the BER despite the great differences in costs as illustrated below.

*Renters are caught in a no win situation – as Illustrated by the BER vs costs table based on a night rate of €0.25/kWh comparing between the best and worst case scenarios versus a D2 which is the average BER it shows a saving of about €6,500 annually that could not be saved…over 20 years it’s a sizeable part of a mortgage.


Ireland has a great opportunity with very little effort to cut more than 1.6 million tons CO₂e annually.

This can be done by just leveraging the private rental sector to reduce the emissions to help us avoid repeating being in the top five emitters in the EU for more than five years. This would not impact negatively as it does to farming – but positively, as the upgrades will create jobs in construction for the economy. It would also reduce Ireland’s energy dependence on imported energy.

Currently the legal and tax framework seem to overlook the split incentive problem, hence not providing an incentive for proactive landlords versus passive ones, as rent is not normally set by BER, but number of rooms and location. It is to this end that a reform of the tax regime can be used to incentivise change to overcome this problem.

Going forward – increasing the quality and quantity of rental properties

Finally, again with war in Ukraine in mind, and the aforementioned lack of rental properties on the market, a vacant property tax could include taxing of unused overhead space (eg, over shops), which especially affects urban areas.

Possibly certain allowances against the building regulations for properties that predate these (which currently seem to be the main obstacle) should be made. Surely they can then be refurbished to as close as compliant as practicable along with a good BER rating in order to increase the number of rental properties?

Author: Gaston Behal, in collaboration with Oldrich Madera. Special thanks to Patrick McCarthy & Jaime Morales Velasco.