As Canada faces the dual challenges of a housing crisis and climate change, it is essential to ensure that efforts to make housing more affordable and diverse do not increase environmental harm. Fortunately, there are viable strategies to address both problems simultaneously.
The federal government has proposed a “renters’ bill of rights,” including a national standard lease agreement that would force landlords to disclose a rental unit’s pricing history, empowering tenants to negotiate more effectively as part of broader tenant protection measures.
Meanwhile, Canada remains committed to achieving its Paris agreement target to reduce greenhouse gas emissions 40-45% below 2005 levels by 2030. To do this, comprehensive measures must be taken across all sectors.
That includes housing because buildings contribute13% of Canada’s greenhouse gas (GHG) emissions, primarily through the combustion of fossil fuels for heating and hot water, and the use of electricity for cooling. It is therefore important to address the GHG output from all residential infrastructure, including rental units.
In the current rental housing market, split incentives between landlords and renters lead to inefficient energy consumption and roadblocks to improve the situation. One way to correct that would be to introduce a rental unit report card program to provide both parties with better information and incentives to act.
Typically, landlords are responsible for the heating and cooling infrastructure in a rental building (a furnace or heat pump, thermal insulation), whereas renters are responsible for the amount of energy consumed within a unit.
When renters pay their own utility bills, landlords have limited incentives to invest in energy-efficient appliances or insulation. After all, the tenant, not the landlord, would recoup the financial and other benefits of greater energy efficiency.
The flip side is that when utility bills are paid by landlords, renters have few incentives to reduce their energy consumption by turning down thermostats or closing windows because they do not pay the cost of their inefficiency.
A key factor driving this split incentive problem is unequal information. Renters typically are unaware of the energy efficiency of a prospective rental unit, which means they cannot factor in the cost of utilities or carbon footprint when deciding where to rent.
This is particularly detrimental when current policy mechanisms, such as the carbon tax, rely on price incentives to encourage consumers to choose low-carbon alternatives.
A rental unit energy report card program—mirroring successful models such as Ireland’s building energy rating certificate—would give renters crucial information about a unit’s carbon footprint and utility costs, promoting informed decision-making and energy conservation.
It would also facilitate a more competitive rental market where energy performance is a key determinant in housing selection.
Such a program would also benefit landlords by offering them incentives to invest in energy-efficient upgrades to attract tenants.
Integrating this policy at the provincial level would encourage the development of a standardized framework for measuring and reporting carbon emissions and utility costs in rental properties. Like the renters’ bill of rights, standardization is crucial for comparability, enabling renters to make informed choices across different cities.
It would also provide municipalities with valuable data to identify areas where community-level programming could significantly reduce carbon emissions, facilitating more strategic planning and investment in green infrastructure.
While an energy report card won’t resolve all the issues in the rental housing market, such as scarcity and financial barriers, it can still be a valuable tool.
Increased transparency for prospective renters would help ensure that landlords consider the energy efficiency of potential upgrades—an incentive they do not currently have.
This is especially important as buildings are required to adapt to warmer summers and a changing climate. Municipalities can also support this initiative by offering resources and incentives for landlords to upgrade their properties, such as subsidies for energy-efficient appliances or low-interest loans for retrofit projects.
A successful rental unit energy report card program would require collaboration between municipal and provincial governments, property owners, and tenants, fostering a community-wide commitment to environmental stewardship.
This type of collaboration is crucial if we are to adequately address both the housing and climate crises.
The authors thank Kathryn Harrison at the University of British Columbia for her helpful comments and suggestions. This article was originally published on Policy Options under a Creative Commons/No Derivatives Licence.
