Modeling landlord responses to the French rental ban

Extended abstract 7-044-26

The French residential sector plays a central role in the energy transition. Achieving carbon neutrality by 2050 requires energy renovations, yet a gap persists between targets and actual renovation rates. Regulatory policies have emerged, the main one being the gradual ban on renting inefficient dwellings. The objective is to encourage landlords to renovate, but they can circumvent the obligation by selling to an owner-occupier. This article investigates the impact of a rental ban on housing stock performance and household finance, considering: (i) the landlord’s decision to renovate or sell; (ii) the effect on rents (expected to rise) and sales prices (expected to fall); (iii) the tenant’s decision to buy or renovate. We use Res-IRF, a microsimulation model of energy demand in the French residential sector incorporating endogenous renovation dynamics. We add new real estate processes to simulate heterogeneous responses. First, we run a full compliance benchmark assuming full renovation compliance and no sales. Second, we explore the sensitivity of results to the share of lease expirations and the share of sales. Third, we endogenize these shares through behavioral decision processes. In the benchmark, renovation spikes and consumption drops occur each time the ban is extended. A higher share of lease expirations increases renovations around tightening years, amplifying regulatory shocks. A higher share of sales reduces renovations, showing that non-compliance weakens the upgrade of the housing stock and undermines expected policy effects. The assessment uses a cost-benefit framework including investment costs, energy savings, CO₂ reductions, health benefits and their distribution across households. These results underscore the importance of policy design that limits non-compliance while supporting landlords in renovation pathways.

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