Rental Investments: Energy Efficiency Is Becoming a Key Factor in Profitability
Discounts at purchase, regulatory constraints, and resale liquidity: the energy performance of residential properties has now become a key factor in rental investments. The “Green Value” study by Notaires de France shows that the Energy Performance Certificate (EPC) no longer merely influences prices but is fundamentally redefining the risk-return profile of residential real estate.
The Energy Performance Certificate (EPC): A New Filter for Rental Profitability
For a long time, rental investors were able to put energy efficiency on the back burner in favor of gross yield or location. Those days are over. In 2024, the energy efficiency rating affects the purchase price, the property’s rentability, and its resale value.
The figures speak for themselves. For properties with comparable features, an older apartment rated A sells for an average of 16% more than a comparable property rated D. Conversely, a property rated G commands an average price premium of 12% for apartments and 25% for houses. This price premium still fuels certain opportunistic arguments, but it is no longer automatically synonymous with a good deal.
Energy-inefficient homes: lower purchase price, higher risk
For investors, the appeal of energy efficiency classes F and G has historically been based on a lower entry price. However, the Notaries’ study shows that this price discount has widened since 2021, a sign that the market is already factoring in the cost of regulatory risk and future renovations.
The share of sales of highly energy-inefficient homes rose sharply between 2021 and 2023, before stabilizing in 2024. This trend reflects a simple reality: many homeowners sold before the regulations became stricter. For investors buying today, this often means acquiring a property that has already been priced by the market, with profitability undermined by renovation requirements.
In the rental market, the penalty is twofold. Energy-inefficient homes see their rental potential limited by gradual bans on renting them out, and their resale value declines faster than average, particularly for single-family homes.
Renovation: A Tool for Preserving Real Estate Value Rather Than a Return-on-Investment Calculation
The study confirms that “green value” now represents a sustainable market premium, rather than a temporary effect driven by regulations. Between 2021 and 2024, the value appreciation associated with the highest energy efficiency ratings increased, while the penalty for classes F and G widened.
For investors, energy-efficient renovations should therefore be viewed less as a simple means of optimizing cash flow and more as a tool for safeguarding their assets. A renovated home improves its liquidity, reduces the risk of regulatory obsolescence, and protects its long-term value. Conversely, holding onto a property with poor energy efficiency amounts to accepting a predictable erosion of capital.
Apartments or houses: very different trade-offs
The impact of the Energy Performance Certificate (EPC) is significantly greater on houses than on apartments. The price discount observed for a house rated G averages 25%, compared to 12% for an apartment. The reasons are structural: higher renovation costs, difficulty in sharing costs, and reliance on individual heating systems.
For investors, this argues for greater caution when it comes to low-rated individual rental properties, particularly in areas with low demand. Conversely, some energy-inefficient apartments located in high-demand areas may still maintain decent liquidity, even if the discount remains very real.
Geography: Where “Green Value” Matters Most
The energy premium varies significantly by region. The southern and western regions have a higher proportion of energy-efficient homes and a more pronounced “green premium.” In Occitanie and Provence-Alpes-Côte d’Azur, energy-efficient homes command a price significantly higher than the national average.
Conversely, in the northern and central regions, where the housing stock is older and less energy-efficient, the decline in value is more severe. For investors, these regional differences underscore the importance of choosing the right market: the same energy performance certificate does not have the same consequences depending on rental demand and the structure of the housing stock.
A New Three-Pronged Approach for Rental Property Investors
The study’s key finding is clear: rental property investments can no longer be analyzed solely through the lens of immediate returns. Three criteria are now equally important: energy efficiency, regulatory compliance, and future liquidity.
Green value acts as a litmus test. It promotes long-term strategies, penalizes outdated real estate, and requires a more asset-based approach to rental properties. For investors, factoring the Energy Performance Certificate (EPC) into the decision-making process early on is no longer an option—it has become a prerequisite for sustainable performance.
