As long as housing remains a profit-driven investment for landlords, the pace and scope of decarbonization will be shaped by their financial calculations. That’s a problem.
Decarbonization is necessary to preserve life as we know it on the planet. But many would have you believe that we can achieve a rapid and equitable transition to clean energy while also preserving the economy as we know it. The case of building decarbonization shows that a much deeper change is needed.
Buildings currently generate about 31 percent of total US greenhouse gas emissions, including roughly 20 percent from residential buildings. In dense cities, the share is even higher: buildings account for just over 40 percent of emissions in San Francisco and Seattle, and nearly 70 percent in places like Chicago and New York City.
The good news is that the necessary upgrades for energy efficiency also come with many benefits to residents. They mean lower utility bills from reduced energy use, improved health from better indoor air quality, and greater comfort from things like modern heating and cooling systems or new appliances. In the case of decarbonization upgrades, these improvements also generate broader societal benefits by reducing greenhouse gas emissions.
But so far, these benefits have not been equally shared. Instead of a green economic populism for the many, we see clean energy benefits for the few.
For residential buildings, decarbonization upgrades have primarily gone to homeowners. A recent study found that renters are unlikely to benefit from most energy efficiency programs, and many local programs aren’t even available to renters. Many programs that are theoretically open to renters, such as rebate programs for clean energy appliances, never actually benefit them in practice.
In part, this is because homeowners are more likely to have the upfront cash needed to make improvements. But the issue goes deeper than that. Renters don’t just lack the money to afford home retrofits; they rarely have the authority to decide what happens to their home at all.
For homeowners, energy efficiency improvements are an easy sell. An initial investment will eventually pay for itself through lower utility bills, and in the meantime, homeowners get to enjoy the added comfort of the improvements.
But in rental housing, who pays and who benefits are different. It’s up to landlords to pay for upgrades, while tenants are the ones who benefit from lower utility bills and added comfort.
In the world of energy policy, this is known as the “split incentive” problem, a term rooted in neoclassical economics that treats the issue as a market inefficiency. But we should understand this for what it really is: class conflict.
A Problem of “Split Incentives”
It’s not that landlords and tenants don’t have split incentives — they clearly do. But framing this as a “split incentive” problem acts as a kind of mystification, obscuring the class conflict inherent to the landlord-tenant relationship.
David Harvey and others have demonstrated how landlords operate as a class that is able to monopolize, control, and restrict access to housing. Where capitalists own the means of production and workers sell their labor for wages, landlords own the means of social reproduction (housing), and tenants pay rent to live in it.
But the “split incentive” concept takes this underlying conflict and recasts it in technical terms. The managerial language of “incentives” suggests that the challenge can be solved through smart policy that benefits renters by rewarding landlords.
You can see this narrative in the subtly coded ways journalists and policymakers talk about this issue. A recent headline in Grist asked, “Can cities make landlords care about energy efficiency?” An article in the Verge bemoaned, “Policymakers haven’t yet built a solution for renters despite a need to decarbonize the entire housing sector.”
The implication is that this is a complex and technical problem but one that can be solved through clever policy design. This framing has had an enormous influence on the way energy policy researchers, advocates, and bureaucrats think about residential decarbonization. By considering the problem as fundamentally about incentives, the solutions that policymakers build for renters inevitably center around “win-win” outcomes that ultimately serve elite interests.
This dynamic is visible in existing retrofit programs, where the few programs that try to serve renters do so mostly through free giveaways to landlords.
For example, the Equitable Building Decarbonization Program in California has committed over $500 million for no-cost home retrofits, while Pennsylvania’s Whole-Home Repairs Program offers grants of up to $50,000 per household for habitability and energy improvements. These programs take meaningful steps to address long-standing inequities by targeting low-income rental housing and taking a whole-home approach to retrofits that includes funding for habitability repairs.
These are some of the strongest programs in the country, standing out by virtue of actually trying to equitably reach renters. In the short term, they provide real relief to tenants, and we should support and expand them wherever possible.
The more uncomfortable truth, however, is that even with these programs, the underlying power imbalance between renters and landlords remains intact. When decarbonization is framed primarily as a problem of incentives, the best policy we can hope for is paying landlords to do the right thing.
From Incentive Management to Class Struggle
It’s not just a matter of semantics. Understanding this dynamic as class conflict rather than simply market inefficiency points us in a fundamentally different direction. Instead of a problem of incentive management, the problem becomes a question of ownership and power.
If the central barrier to building decarbonization is rooted in the opposing interests of a class-based housing system, then the issue cannot be resolved through a well-designed policy. It will depend on the ability of tenants to build enough power to demand safe, healthy, and climate-resilient homes. The path to decarbonization is not a set of incentives to tweak but a struggle to organize and build tenant power.
A strong tenant movement will also have different demands. Tenants won’t be asking for programs that pay landlords to decarbonize; they will call for nonmarket solutions like social housing that directly confront the system of housing that maintains rental property ownership for unchecked private profit. As long as housing remains a profit-driven investment for landlords, the pace and scope of decarbonization will be shaped by their financial calculations.
Social housing offers a clear alternative. When housing is owned and managed for public benefit rather than private profit, the benefits of decarbonization are internalized within the system. Home upgrades translate directly into systemwide savings as well as longer-term averted costs in climate impacts and public health.
The power of this model becomes obvious when you look at the ways cities and countries with robust social housing systems are able to leverage their social housing stock to promote environmental sustainability and resilience. That’s why advocates are increasingly using the term “green social housing” — not only to envision more beautiful and sustainable buildings but also to highlight that social housing should be a central part of our climate agenda.
Rejecting an incentive-based approach clarifies how we should address private rental housing. Instead of trying to coax landlords with financial incentives to voluntarily decarbonize, we need strong discipline of the private housing market in the form of rent control, eviction protections, and decarbonization standards. As we require homes to transition off of fossil fuels, tenant protections will ensure climate action is not a trigger for rent hikes or displacement.
This isn’t about developing the right set of policies. It’s about who has the power to make their policies prevail. As Ricardo Tranjan argues in The Tenant Class, “The challenge for the tenant class is not to find solutions for the so-called housing crisis, but to enact the solutions we know work.”
If we reject the framing of “split incentives,” we are forced to confront the class conflict as the core of the problem. Decarbonizing housing will not be achieved by fine-tuning incentives but by transforming who owns and controls housing — and building tenant power to demand and win it.
This work has been made possible by the support of the Puffin Foundation.
