IDEAS home Printed from https://ideas.repec.org/a/spr/envsyd/v35y2015i1d10.1007_s10669-015-9535-8.html
   My bibliography  Save this article

Energy-efficient homes and mortgage risk: crossing the chasm at last?

Author

Listed:
  • Andrew R. Sanderford

    (University of Arizona)

  • George A. Overstreet

    (University of Virginia)

  • Peter A. Beling

    (University of Virginia)

  • Kanshukan Rajaratnam

    (University of Cape Town)

Abstract

A topic of recent interest is energy-efficient houses. In the last twenty years, the US market has witnessed growth in the adoption of energy efficiency via various building technologies, design schemes, and eco-labels by developers, homebuilders, and homebuyers. Although housing and real estate scholars have begun explorations of the factors associated with the diffusion of energy efficiency, the subject has yet to be explored from the perspective of a critical stakeholder—the mortgage lender. This paper distinguishes itself from the extant literature in several ways. First, using a diffusion of innovation intellectual framework, the authors explore the role of the lender as an innovation gatekeeper. Second, as a review article, the authors summarize several key papers from the underwriting, credit scoring, and finance literature to help frame a number of market frictions that could mute further diffusion of energy efficiency in housing. Finally, the authors analyze these frictions and offer both market and public policy suggestions that may help overcome these frictions and increase opportunities for both private competitive advantage and market transparency.

Suggested Citation

  • Andrew R. Sanderford & George A. Overstreet & Peter A. Beling & Kanshukan Rajaratnam, 2015. "Energy-efficient homes and mortgage risk: crossing the chasm at last?," Environment Systems and Decisions, Springer, vol. 35(1), pages 157-168, March.
    • Handle: RePEc:spr:envsyd:v:35:y:2015:i:1:d:10.1007_s10669-015-9535-8
    DOI: 10.1007/s10669-015-9535-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10669-015-9535-8
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10669-015-9535-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Piet Eichholtz & Nils Kok & John M. Quigley, 2013. "The Economics of Green Building," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 50-63, March.
    2. Zerkin, Allen J., 2006. "Mainstreaming high performance building in New York City: A comprehensive roadmap for removing the barriers," Technology in Society, Elsevier, vol. 28(1), pages 137-155.
    3. Gene Amromin & Anna L. Paulson, 2009. "Comparing patterns of default among prime and subprime mortgages," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 33(Q II), pages 18-37.
    4. Wiginton, John C., 1980. "A Note on the Comparison of Logit and Discriminant Models of Consumer Credit Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(3), pages 757-770, September.
    5. Gary Pivo & Jeffrey D. Fisher, 2011. "The Walkability Premium in Commercial Real Estate Investments," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(2), pages 185-219, June.
    6. Dastrup, Samuel R. & Graff Zivin, Joshua & Costa, Dora L. & Kahn, Matthew E., 2012. "Understanding the Solar Home price premium: Electricity generation and “Green” social status," European Economic Review, Elsevier, vol. 56(5), pages 961-973.
    7. H Zhu & P A Beling & G A Overstreet, 2001. "A study in the combination of two consumer credit scores," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 52(9), pages 974-980, September.
    8. Roberto G. Quercia & Anthony Pennington-Cross & Chao Yue Tian, 2012. "Mortgage Default and Prepayment Risks among Moderate- and Low-Income Households," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 40, pages 159-198, December.
    9. Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1082-1095, October.
    10. Slaughter, Sarah, 1993. "Innovation and learning during implementation: a comparison of user and manufacturer innovations," Research Policy, Elsevier, vol. 22(1), pages 81-95, February.
    11. Richard K. Green & Susan M. Wachter, 2007. "The housing finance revolution," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 21-67.
    12. Franz Fuerst & Patrick McAllister, 2009. "An Investigation of the Effect of Eco-Labeling on Office Occupancy Rates," Real Estate & Planning Working Papers rep-wp2009-08, Henley Business School, University of Reading.
    13. T Bellotti & J Crook, 2009. "Credit scoring with macroeconomic variables using survival analysis," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(12), pages 1699-1707, December.
    14. M Malik & L C Thomas, 2010. "Modelling credit risk of portfolio of consumer loans," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(3), pages 411-420, March.
    15. Scott Sklar, 2014. "Perspective on multi-scale assets for clean energy technologies in buildings," Environment Systems and Decisions, Springer, vol. 34(2), pages 323-325, June.
    16. David Harrison & Michael Seiler, 2011. "The political economy of green office buildings," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 29(4/5), pages 551-565, July.
    17. Christine Greenhalgh & Mark Rogers, 2010. "Innovation, Intellectual Property, and Economic Growth," Economics Books, Princeton University Press, edition 1, volume 0, number 9221.
    18. Thomas P. Seager & Zachary A. Collier & Igor Linkov & James H. Lambert, 2013. "Environmental sustainability, complex systems, and the disruptive imagination," Environment Systems and Decisions, Springer, vol. 33(2), pages 181-183, June.
    19. Crook, Jonathan & Banasik, John, 2012. "Forecasting and explaining aggregate consumer credit delinquency behaviour," International Journal of Forecasting, Elsevier, vol. 28(1), pages 145-160.
    20. Deng, Yongheng & Quigley, John M. & Van Order, Robert & Mac, Freddie, 1996. "Mortgage default and low downpayment loans: The costs of public subsidy," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 263-285, June.
    21. Barbara J. Jennings & Eric D. Vugrin & Deborah K. Belasich, 2013. "Resilience certification for commercial buildings: a study of stakeholder perspectives," Environment Systems and Decisions, Springer, vol. 33(2), pages 184-194, June.
    22. Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9), pages 1082-1095.
    23. Robert B. Avery & Raphael W. Bostic & Paul S. Calem & Glenn B. Canner, 1996. "Credit risk, credit scoring, and the performance of home mortgages," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 82(Jul), pages 621-648, July.
    24. Gary Pivo & Jeffrey D. Fisher, 2010. "Income, Value and Returns in Socially Responsible Office Properties," Journal of Real Estate Research, American Real Estate Society, vol. 32(3), pages 243-270.
    25. Nikhil Kaza & Roberto Quercia & Robert J. Sahadi, 2014. "Home energy efficiency and mortgage risks: an extended abstract," Community Development Innovation Review, Federal Reserve Bank of San Francisco, issue 01, pages 063-069.
    26. Crook, Jonathan N. & Edelman, David B. & Thomas, Lyn C., 2007. "Recent developments in consumer credit risk assessment," European Journal of Operational Research, Elsevier, vol. 183(3), pages 1447-1465, December.
    27. Richard B. Howarth & Alan H. Sanstad, 1995. "Discount Rates And Energy Efficiency," Contemporary Economic Policy, Western Economic Association International, vol. 13(3), pages 101-109, July.
    28. H Zhu & P A Beling & G A Overstreet, 2002. "A Bayesian framework for the combination of classifier outputs," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 53(7), pages 719-727, July.
    29. Nils Kok & Marquise McGraw & John M. Quigley, 2011. "The Diffusion of Energy Efficiency in Building," American Economic Review, American Economic Association, vol. 101(3), pages 77-82, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kahn, Matthew E. & Walsh, Randall, 2015. "Cities and the Environment," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 405-465, Elsevier.
    2. Kahn, Matthew E. & Kok, Nils, 2014. "The capitalization of green labels in the California housing market," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 25-34.
    3. Jonathan E. Hughes & Molly Podolefsky, 2015. "Getting Green with Solar Subsidies: Evidence from the California Solar Initiative," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(2), pages 235-275.
    4. Fischbacher, Urs & Schudy, Simeon & Teyssier, Sabrina, 2021. "Heterogeneous preferences and investments in energy saving measures," Resource and Energy Economics, Elsevier, vol. 63(C).
    5. Chegut, Andrea & Eichholtz, Piet & Kok, Nils, 2019. "The price of innovation: An analysis of the marginal cost of green buildings," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    6. K Rajaratnam & P Beling & G Overstreet, 2010. "Scoring decisions in the context of economic uncertainty," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(3), pages 421-429, March.
    7. Lee, Yongwoong & Rösch, Daniel & Scheule, Harald, 2016. "Accuracy of mortgage portfolio risk forecasts during financial crises," European Journal of Operational Research, Elsevier, vol. 249(2), pages 440-456.
    8. Deng, Yongheng & Wu, Jing, 2014. "Economic returns to residential green building investment: The developers' perspective," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 35-44.
    9. Delmas, Magali A. & Lessem, Neil, 2014. "Saving power to conserve your reputation? The effectiveness of private versus public information," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 353-370.
    10. Dimitris Andriosopoulos & Michalis Doumpos & Panos M. Pardalos & Constantin Zopounidis, 2019. "Computational approaches and data analytics in financial services: A literature review," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 70(10), pages 1581-1599, October.
    11. Niina Leskinen & Jussi Vimpari & Seppo Junnila, 2020. "A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties," Sustainability, MDPI, vol. 12(7), pages 1-22, March.
    12. Delgado, Michael S. & Harriger, Jessica L. & Khanna, Neha, 2015. "The value of environmental status signaling," Ecological Economics, Elsevier, vol. 111(C), pages 1-11.
    13. Avis Devine & Andrew Sanderford & Chongyu Wang, 2024. "Sustainability and Private Equity Real Estate Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 68(2), pages 161-187, February.
    14. Toshi H. Arimura & Elke D. Groh & Miwa Nakai & Andreas Ziegler, 2022. "The causal effect of private and organizational climate-related identity on climate protection activities: Evidence from a framed field experiment in Japan," MAGKS Papers on Economics 202229, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    15. Comerford, David A. & Lange, Ian & Moro, Mirko, 2018. "Proof of concept that requiring energy labels for dwellings can induce retrofitting," Energy Economics, Elsevier, vol. 69(C), pages 204-212.
    16. Lu Gao & Kanshukan Rajaratnam & Peter Beling, 2016. "Loan origination decisions using a multinomial scorecard," Annals of Operations Research, Springer, vol. 243(1), pages 199-210, August.
    17. Do, Hung Xuan & Rösch, Daniel & Scheule, Harald, 2018. "Predicting loss severities for residential mortgage loans: A three-step selection approach," European Journal of Operational Research, Elsevier, vol. 270(1), pages 246-259.
    18. Caroline Dieckhöner, 2012. "Does Subsidizing Investments in Energy Efficiency Reduce Energy Consumption?: Evidence from Germany," SOEPpapers on Multidisciplinary Panel Data Research 527, DIW Berlin, The German Socio-Economic Panel (SOEP).
    19. Giraudet, Louis-Gaëtan, 2020. "Energy efficiency as a credence good: A review of informational barriers to energy savings in the building sector," Energy Economics, Elsevier, vol. 87(C).
    20. Julia Blasch & Claudio Daminato, 2018. "Behavioral anomalies and energy-related individual choices: the role of status-quo bias," CER-ETH Economics working paper series 18/300, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:envsyd:v:35:y:2015:i:1:d:10.1007_s10669-015-9535-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.