Does Retrofitting Pay Off? An Analysis of German Multifamily Building Data

Figures & data

Table 1. Descriptive statistics.

Variable	Unit	Mean	Std. Dev	Min.	Q5%	Q30%	Median	Q70%	Q90%	Max.
Asking rent	€ per month	751.864	529.959	101.5	269	435	599	849	1,380	12,000
Log asking rent	Log € p.m.	6.441	0.583	4.62	5.595	6.075	6.395	6.744	7.23	9.393
Rent per m^2	€/m^2 p.m.	10.188	4.412	0.988	5.102	7.375	9.375	11.54	15.833	83.673
Energy consumption	kWh/m^2 p.a.	118.394	54.088	1.1	42	87	114.5	141.37	186.7	499.21
Log energy consumption	Log kWh/m^2 p.a.	4.655	0.525	0.095	3.738	4.466	4.741	4.951	5.23	6.213
Constructed	Number	1972.583	32.725	1901	1910	1958	1972	1995	2016	2020
Age	Number	45.014	32.703	0	0	22	46	60	99	119
Living Area	m^2	72.711	31.382	10.1	32	56	67.39	81.6	111	482
Floor	Number	2.185	1.825	−1	0	1	2	3	4	45
Rooms	Number	2.53	0.953	1	1	2	2.5	3	4	10
Households	Number	530,232.9	632,779.6	50,781	62,580	137,849	303,140	396,228	2,008,823	2,008,823
Purchasing Power	€/household p.a.	41,783.01	5,714.261	31,415.1	34,586.63	37,335.6	41,418.41	45,003.1	48,007.09	54,784.02
Elevator	Binary 1 = yes	0.358	0.48	0	0	0	0	1	1	1
Balcony	Binary 1 = yes	0.715	0.451	0	0	1	1	1	1	1
Guests WC	Binary 1 = yes	0.207	0.405	0	0	0	0	0	1	1
Built-in Kitchen	Binary 1 = yes	0.448	0.497	0	0	0	0	1	1	1
Garden	Binary 1 = yes	0.195	0.396	0	0	0	0	0	1	1
Cellar	Binary 1 = yes	0.792	0.406	0	0	1	1	1	1	1
Simple equipment	Binary 1 = yes	0.016	0.124	0	0	0	0	0	0	1
Normal equipment	Binary 1 = yes	0.496	0.5	0	0	0	0	1	1	1
Sophisticated equipment	Binary 1 = yes	0.434	0.496	0	0	0	0	1	1	1
Luxury equipment	Binary 1 = yes	0.054	0.225	0	0	0	0	0	0	1

Table 2. Pearson correlation matrix of variables.

	Variable	i	ii	iii	Iv	v	Vi	Vii	viii	ix	x	xi	xii	xiii	xiv	xv	xvi	xvii	xviii	xix	xx	xxi
i	Asking rent	1
ii	Log asking rent	0.91	1
iii	Rent per m^2	0.62	0.65	1
iv	Energy consumption	−0.26	−0.28	−0.26	1
v	Log energy consumption	−0.30	−0.33	−0.30	0.93	1
vi	Constructed	0.27	0.30	0.30	−0.46	−0.51	1
vii	Age	−0.27	−0.30	−0.30	0.46	0.51	−1.00	1
viii	Living Area	0.77	0.75	0.08	−0.15	−0.18	0.13	−0.13	1
ix	Floor number	0.11	0.08	0.11	−0.05	−0.03	0.03	−0.03	0.04	1
x	Number of Rooms	0.51	0.54	−0.08	−0.07	−0.08	0.04	−0.04	0.80	0.00	1
xi	Households	0.27	0.30	0.32	−0.04	−0.03	−0.06	0.05	0.10	0.10	−0.01	1
xii	Purchasing Power	0.29	0.35	0.46	−0.04	−0.07	0.21	−0.20	0.06	−0.02	0.01	−0.24	1
xiii	Elevator	0.33	0.34	0.37	−0.36	−0.39	0.46	−0.46	0.16	0.26	0.01	0.13	0.11	1
xiv	Balcony	0.27	0.34	0.13	−0.20	−0.21	0.30	−0.30	0.29	0.01	0.23	0.08	0.10	0.23	1
xv	Guests WC	0.49	0.50	0.17	−0.17	−0.20	0.23	−0.23	0.55	0.02	0.44	0.02	0.13	0.20	0.22	1
xvi	Built-in Kitchen	0.27	0.30	0.43	−0.12	−0.12	0.18	−0.17	0.04	0.05	−0.08	0.20	0.13	0.19	0.08	0.10	1
xvii	Garden	0.03	0.03	−0.02	−0.01	−0.02	−0.01	0.01	0.06	−0.16	0.08	−0.04	−0.02	−0.07	0.00	0.06	0.03	1
xviii	Cellar	0.06	0.08	−0.05	−0.06	−0.05	0.09	−0.09	0.11	−0.06	0.15	−0.13	0.09	0.03	0.16	0.11	−0.02	0.10	1
xix	Simple equipment	−0.08	−0.10	−0.08	0.06	0.06	−0.06	0.06	−0.05	0.01	−0.02	−0.01	−0.01	−0.04	−0.04	−0.05	−0.07	−0.03	−0.03	1
xx	Normal equipment	−0.45	−0.51	−0.43	0.28	0.32	−0.29	0.29	−0.30	−0.01	−0.15	−0.11	−0.19	−0.28	−0.21	−0.28	−0.25	−0.05	−0.05	−0.13	1
xxi	Sophisticated equipment	0.29	0.39	0.32	−0.22	−0.25	0.22	−0.22	0.19	−0.01	0.10	0.08	0.16	0.21	0.18	0.20	0.21	0.04	0.04	−0.11	−0.87	1
xxii	Luxury equipment	0.41	0.34	0.29	−0.17	−0.20	0.17	−0.17	0.27	0.04	0.13	0.08	0.08	0.18	0.09	0.21	0.14	0.04	0.03	−0.03	−0.24	−0.21

Figure 1. German energy efficiency classes of residential buildings according to German Building Energy Act. (Source: Own depiction).

Table 3. Summary statistics and Pearson correlation coefficients for EPC classes.

		Mean	Mean energy kWh/m^2a	Mean rent €/m^2 p.m.	i	ii	Iii	iv	V	vi	vii	viii	ix	xi
i	Rent (€/m^2)	10.19			1
ii	Energy (kWh/m^2a)	118.39			−0.26	1
iii	EPC – A+	0.02	19.2	13.18	0.11	−0.29	1
iv	EPC – A	0.05	40.9	13.78	0.19	−0.34	−0.04	1
v	EPC – B	0.15	62.2	12.57	0.23	−0.43	−0.07	−0.1	1
vi	EPC – C	0.16	87.4	9.83	−0.04	−0.25	−0.07	−0.1	−0.19	1
vii	EPC – D	0.23	114.7	9.27	−0.11	−0.03	−0.09	−0.13	−0.23	−0.24	1
viii	EPC – E	0.18	143.5	9.34	−0.09	0.22	−0.07	−0.11	−0.2	−0.21	−0.26	1
ix	EPC – F	0.13	176.6	9.27	−0.08	0.41	−0.06	−0.09	−0.16	−0.17	−0.21	−0.18	1
x	EPC – G	0.05	219.2	9.19	−0.05	0.43	−0.04	−0.05	−0.1	−0.1	−0.13	−0.11	−0.09	1
xi	EPC – H	0.02	287.7	8.82	−0.04	0.45	−0.02	−0.03	−0.06	−0.06	−0.08	−0.07	−0.05	−0.03

Figure 2. Frequency distribution of building efficiency classes according to the final energy demand in the German building stock (Source: Own depiction according to BMWi, 2020).

Table 4. Descriptive statistics for green retrofit data.

Variable	Mean	S	Min.	Q25	Median	Q75	Max.
Number of units	39	26	6	24	29	47	114
Total living area (m^2)	2,389.57	1,662.66	378.42	1,310.60	1,927.10	2,983.61	7,725.66
Year of retrofit	2016	1.72	2013	2015	2017	2018	2019
Cost of retrofit (EUR/m^2)	828.02	312.30	200.52	594.04	787.53	1,104.19	1,344.84
Energy demand before retrofit (kWh/m^2a)	236.88	77.00	124.97	166.31	249.00	291.05	387.40
Energy demand after retrofit (kWh/m^2a)	69.97	25.47	33.58	50.06	74.00	84.41	118.49
Energy consumption before retrofit (kWh/m^2a)	176.28	39.26	114.48	150.99	181.24	194.05	258.30
Energy consumption after retrofit (kWh/m^2a)	94.39	20.11	57.18	83.46	91.75	98.85	151.37
Energy demand saving (kWh/m^2a)	166.91	62.72	79.98	113.52	179.00	204.10	322.40
Energy consumption saving (kWh/m^2a)	81.89	35.85	25.44	53.47	89.16	101.97	173.33

Table 5. Pearson correlation coefficients for green retrofit data.

	Variable	I	ii	iii	iv	v	vi	vii	viii	ix
I	Number of units	1
Ii	Total living area (m^2)	0.95	1
iii	Year of retrofit	−0.12	−0.02	1
Iv	Cost of retrofit (€/m^2)	−0.32	−0.30	−0.16	1
V	Energy demand before retrofit (kWh/m^2a)	−0.34	−0.35	−0.33	0.12	1
vi	Energy demand after retrofit (kWh/m^2a)	−0.38	−0.36	−0.10	−0.20	0.64	1
vii	Energy consumption before retrofit (kWh/m^2a)	−0.19	−0.15	−0.12	0.34	0.72	0.37	1
viii	Energy consumption after retrofit (kWh/m^2a)	−0.17	−0.25	0.26	−0.24	0.27	0.42	0.42	1
Ix	Energy demand saving (kWh/m^2a)	−0.26	−0.28	−0.36	0.23	0.95	0.37	0.72	0.15	1
X	Energy consumption saving (kWh/m^2a)	−0.12	−0.02	−0.28	0.50	0.64	0.17	0.86	−0.10	0.70

Table 6. Regression results for energy-related exogenic variables on log rent €/m².

	(1)	(2)	(3)	(4)
log(Energy per m^2)	−0.058***		8.047***
	(0.001)		(edf)
A+		0.134***		0.039***
		(0.002)		(0.002)
A		0.109***		0.024***
		(0.001)		(0.001)
B		0.069***		0.021***
		(0.001)		(0.001)
C		0.009***		0.008***
		(0.001)		(0.001)
D		−0.002**		0.003***
		(0.001)		(0.001)
E		−0.003***		0.001
		(0.001)		(0.001)
F		−0.002**		0.002*
		(0.001)		(0.001)
Spatial FE	Yes	Yes	Yes	Yes
Time FE	Yes	Yes	Yes	Yes
N	533,780	533,780	533,780	533,780
Adjusted R^2	0.926	0.927	0.934	0.934

Notes. Significant at *10, **5, and ***1 percent levels; standard errors in brackets below the estimated coefficients; effective degrees of freedom are reported for nonlinear estimates within nonlinear models. The estimated coefficients are marked with “edf” in brackets below. The reported significance shows the significance of smooth terms.

Figure 3. Derivation of the marginal benefit curve. (Source: Own depiction).

Figure 4. Derivation of the marginal cost curve for energy demand (a) and energy consumption (b). (Source: Own depiction).

Figure 5. Marginal cost curves, marginal benefit curve and energy cost saving. (Source: Own depiction).

Table 7. Distribution of the CO₂-tax burden by EPC classes on tenant and landlord.

Emissions (kg CO2/m^2 a)	Tax payed by Landlord (%)	Tax payed by Tenant in (%)	Approximate EPC class	Related emissions with EF of gas (kg CO2/m^2a)
<12	0	100	A+ & A	4.65 & 9.89
12$\le$17	10	90	B	15.05
17$\le$22	20	80	C	21.16
22$\le 2$7	30	70	–	–
27$\le$32	40	60	D	27.75
32$\le$37	50	50	E	34.72
37$\le$42	60	40	–	–
42$\le$47	70	30	F	42.74
47$\le$52	80	20	–	–
$\ge$52	90	10	G & H	53.05 & 69.63

Figure 6. Marginal cost curves, marginal benefit curve and energy cost saving. (Source: Own depiction).

Table A1. Full regression results for response variable: log rent €/m².

	(1)	(2)	(3)	(4)
log (Energy per m^2)	−0.058***		8.047***
	(0.001)		(edf)
A+		0.134***		0.039***
		(0.002)		(0.002)
A		0.109***		0.024***
		(0.001)		(0.001)
B		0.069***		0.021***
		(0.001)		(0.001)
C		0.009***		0.008***
		(0.001)		(0.001)
D		−0.002**		0.003***
		(0.001)		(0.001)
E		−0.003***		0.001
		(0.001)		(0.001)
F		−0.002**		0.002*
		(0.001)		(0.001)
log(area)	0.774***	0.775***	8.988***	8.988***
	(0.001)	(0.001)	(edf)	(edf)
Age	−0.001***	−0.0005***	8.993***	8.991***
	(0.00001)	(0.00001)	(edf)	(edf)
floor number	−0.00003	0.0005***	8.958***	8.898***
	(0.0001)	(0.0001)	(edf)	(edf)
number of rooms	0.031***	0.031***	8.970***	8.963***
	(0.0004)	(0.0004)	(edf)	(edf)
Elevator	0.031***	0.027***	0.017***	0.017***
	(0.001)	(0.001)	(0.001)	(0.001)
Balcony	0.023***	0.024***	0.037***	0.037***
	(0.001)	(0.001)	(0.001)	(0.001)
Guests WC	0.043***	0.043***	0.014***	0.014***
	(0.001)	(0.001)	(0.001)	(0.001)
Built-in Kitchen	0.064***	0.065***	0.063***	0.063***
	(0.001)	(0.001)	(0.0005)	(0.0005)
Garden	0.014***	0.014***	0.012***	0.012***
	(0.001)	(0.001)	(0.001)	(0.001)
Cellar	−0.027***	−0.025***	−0.014***	−0.014***
	(0.001)	(0.001)	(0.001)	(0.001)
Simple equipment	−0.077***	−0.078***	−0.085***	−0.085***
	(0.002)	(0.002)	(0.002)	(0.002)
Sophisticated equipment	0.141***	0.138***	0.118***	0.118***
	(0.001)	(0.001)	(0.001)	(0.001)
Luxury equipment	0.282***	0.275***	0.217***	0.217***
	(0.001)	(0.001)	(0.001)	(0.001)
log(Purchasing Power)	1.051***	1.029***	6.281***	6.137***
	(0.068)	(0.067)	(edf)	(edf)
log(Households)	0.109***	0.110***	1.082***	1.089***
	(0.008)	(0.008)	(edf)	(edf3)
Spatial FE	Yes	Yes	Yes	Yes
Time FE	Yes	Yes	Yes	Yes
N	533,780	533,780	533,780	533,780
Adjusted R^2	0.926	0.927	0.934	0.934

Notes. Significant at *10, **5, and ***1 percent levels; standard errors in brackets below the estimated coefficients; effective degrees of freedom are reported for nonlinear estimates within nonlinear models. The estimated coefficients are marked with “edf” in brackets below. The reported significance shows the significance of smooth terms.

Table A2. Calculation of marginal benefit for each EPC class.

	A+	A	B	C	D	E	F
Green Premium (%)	3.98	2.43	2.12	0.80	0.30	0.10	0.20
Green Premium (€/m^2 p.m.)	0.36	0.22	0.19	0.07	0.03	0.01	0.02
Total Benefit (€/m^2)	112.28	68.58	59.91	22.68	8.48	2.82	5.65
$\Delta$ Epi (kWh/m^2a)	235.21	213.57	192.25	166.98	139.76	110.97	77.80
Marginal Benefit (€/kWh)	0.48	0.32	0.31	0.14	0.06	0.03	0.07

Notes. The green Premium in €/m² p.m. is calculated on the basis of an average rent of €9.09/m² p.m. in the reference category. The total benefit is calculated as the NPV of monthly payments over a 50-year period with bullet payments and a discount rate of 3%. $\Delta$ Epi always corresponds to the average change compared to the reference category.

BMWi – Bundesministerium für Wirtschaft und Energie (2020). Langfristige Renovierungsstrategie der Bundesregierung. https://www.bmwi.de/Redaktion/DE/Publikationen/Energie/langfristige-renovierungsstrategie-der-bundesregierung.pdf?__blob=publicationFile&v=6

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