N°25-101: Who Pays for Higher Energy Prices? Distributional Effects in the Housing Market

We study how energy price shocks transmit through segmented housing markets. Using German rental listings from 2015 to 2024, we show that higher energy prices are capitalized into rents only in high-rent segments, where elastic demand pressures landlords to reduce rents for inefficient units. In low-rent segments, characterized by less elastic demand and tight markets, rents do not adjust, leaving low-income households to bear the full increase in energy bills. As a result, total housing costs for low-income households rise three times more than for high-income households when energy prices increase, amplifying existing inequality.