Is Energy Efficiency Capitalized in Home Prices? Evidence from Three Cities
RFF Academic Seminar
Research Director and Senior Fellow, Resources for the Future
One oft-cited explanation for underinvestment in residential energy efficiency is that homeowners do not expect to occupy their homes long enough to realize benefits that offset their investment costs. This is problematic because homeowners may not believe that the energy efficiency features of a home will be capitalized in the selling price. In this paper, we look for evidence of such capitalization using data from real estate multiple listing services (MLS) in three metropolitan areas: the Research Triangle region of North Carolina; Austin, Texas; and Portland, Oregon. Realtors participating in the MLS services in these regions have agreed to report a set of “green” characteristics on home listing sheets, including certifications such as Energy Star and, in Portland and Austin, local certifications. We examine over 400,000 housing transactions in these markets and estimate separate hedonic price regressions for the three cities. To identify the treatment effect of certification, we match houses on the basis of vintage. Our results suggest that Energy Star certification increases the sales prices of homes that were built between 1995 and 2006 (1995 is the first year of the Energy Star program) but has no statistically significant effect on sales prices for homes built after 2006. The local certifications in Austin and Portland appear to have larger effects on sales prices than Energy Star and the effect holds for newer homes as well as older ones.
We calculate the implied energy savings in the estimated price premiums and compare to estimates of energy costs in the three markets. It appears that buyers either overvalue the energy savings from certification or that other aspects of certification are valuable. Our findings suggest that further research is needed to better understand how consumers interpret home certifications and how they value the combination of “green” characteristics embodied in those certifications.
Thursday, May 23, 2013
12:00 - 1:30 p.m.
Lunch will be provided.
7th Floor Conference Room
1616 P St. NW
Washington, DC 20036
All seminars will be in the 7th Floor Conference Room at RFF, 1616 P Street NW. Attendance is open, but involves pre-registration no later than two days prior to the event. For questions and to register to an event, please contact Khadija Hill at email@example.com (tel. 202-328-5174). Updates to our academic seminars schedule will be posted at www.rff.org/academicseminarseries.