especially when tenants pay for heat but are not particularly concerned about heating costs at the time they choose the space. After a building is occupied, the owner still has limited incentive to improve its energy efficiency. If the occupants pay for heating and cooling, they get the immediate benefits of any investment, even though the owner will eventually benefit if prospective future occupants consider energy costs. If owners pay for heating and cooling, they may be deterred from investing by the prospect that the occupants will use up the potential savings by wasteful behavior, even though this would not happen unless the occupants became more wasteful after the investment than they were before. In general, then, owners and occupants can prevent each other from benefitting from certain energy-saving actions.

Policy Alternatives. Some policies have been tried for promoting energy efficiency in rented buildings, and they offer hope in certain situations. For example, in master-metered buildings, which account for over half the energy used in multifamily housing (McClelland, 1980), the various methods that have been tried for providing incentives for residents to use less energy include contests among residents, rebates for energy savings, experiments with individual metering and submetering, and a residential utility billing system (RUBS) that allocates energy costs among residents by a mathematical formula. Individual metering and RUBS are the systems with the greatest potential for widespread application. Both shift the immediate economic incentives for energy saving from owners to occupants, and energy savings have been reported. An analysis of three experiments with individual metering, for example, concluded that it led to savings of about 22 percent of electricity and used for cooling, lighting, and appliances, about 14 percent of electricity in all-electric buildings, and about 5 percent of energy used only for heating and hot water (McClelland, 1980). RUBS, which does not involve capital costs for meters, produced smaller savings—8 percent, 5 percent, and 5 percent, respectively, for the three patterns of use. Both systems produced only modest savings in energy used for space and water heating which accounts for more than three-quarters of energy use in multifamily housing (McClelland, 1980).

Individual metering removes some of the incentive for building owners to invest in energy efficiency, so it may also waste energy while it saves. There is little empirical evidence available, however, on the extent to which the energy efficiency of individually metered buildings may decline. One econometric study (Neels, 1981) found that owners of individually metered buildings spent about $30 (15 percent) less per year on repairs than owners of master-metered buildings. Because more than half of this difference was made up by increased spending by tenants, the author of the study concluded that the net incentive is relatively minor. Clearly, more research is needed before drawing conclusions about the net energy savings that can