Energy Codes and the Landlord-Tenant Problem
AbstractThis paper assesses whether commercial real estate participants are willing to pay apremium for an energy efficient building that has not received a green label. I utilizea unique dataset of detailed building-level observations and a spatial semiparametricmatching framework that exploits quasi-experimental state-by-year variation in the implementationof mandatory building energy codes, to estimate selling price and rentpremiums for a more stringent code. I find that buildings constructed under a morestringent energy code are associated with rent and selling price premiums of approximately2.7% and 10%, respectively, compared to buildings constructed just before thecode came into effect. When tenants pay directly for utilities, buildings constructedunder an energy code are associated with 5.7% higher rents. These premiums are consistentwith complete capitalization of estimated building-level savings, and thereforecast doubt on the existence of an energy efficiency gap resulting from adverse selectionbetween landlords and tenants in commercial buildings.
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Bibliographic InfoPaper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt2bq3x1t6.
Date of creation: 01 Jun 2013
Date of revision:
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Social and Behavioral Sciences; energy efficiency; building codes; real estate;
Other versions of this item:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-ENE-2013-07-28 (Energy Economics)
- NEP-URE-2013-07-28 (Urban & Real Estate Economics)
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