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Air pollution and the housing market: Evidence from Germany’s Low Emission Zones

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  • Gruhl, Henri
  • Volkhausen, Nicolas
  • Pestel, Nico
  • aus dem Moore, Nils

Abstract

This paper studies whether air quality improvements from driving restrictions are valued in the housing market, using comprehensive data on real estate prices in Germany. For identification, we exploit the staggered introduction of Low Emission Zones (LEZs) across German cities, restricting inner-city access for emission-intensive vehicles. We find that air quality improvements are reflected by roughly 2 percent higher apartment rents. The results are primarily driven by earlier LEZ implementations in areas with relatively higher pre-intervention pollution levels and in areas less dependent on cars. Our findings have important implications for planned changes to the emission intensity of the vehicle fleet, underscoring the potential implications of transitioning to cleaner transportation systems.

Suggested Citation

  • Gruhl, Henri & Volkhausen, Nicolas & Pestel, Nico & aus dem Moore, Nils, 2025. "Air pollution and the housing market: Evidence from Germany’s Low Emission Zones," Journal of Environmental Economics and Management, Elsevier, vol. 132(C).
    • Handle: RePEc:eee:jeeman:v:132:y:2025:i:c:s0095069625000452
    DOI: 10.1016/j.jeem.2025.103161
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    2. König, Christian & Salomo, Katja & Helbig, Marcel, 2026. "Understanding variation in neighbourhood environmental inequalities: The influence of residential segregation, gentrification, and other city-level factors," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue OnlineFir, pages 1-25.
    3. Michael Cary & Brad Humphreys, 2026. "The Impact of Road Quality on Nearby House Prices," Working Papers 26-07, Department of Economics, West Virginia University.
    4. Hirsch, Michael & Grund, Christian, 2026. "Dirty Air, Dirty Play: The Effect of Air Pollution on Sabotage in Tournaments," IZA Discussion Papers 18512, IZA Network @ LISER.

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    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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