The 'Green’ Premium in Israel: Measuring the Effects of Environmental Certification on Housing Prices

‘Green’ building initiatives have led to the emergence of market-based policy approaches in a number of countries. Many of these have taken the form of environmental certification for buildings. A number of studies have examined the additional construction costs involved in achieving ‘green’ certification, and these studies suggest that they are relatively low, around 2% on average. Evidence is accumulating, however, that the "green premium" – or the extra cost that homebuyers pay to purchase a property in a certified green building – is systematically higher than this. This study aims to identify the nature and scale of the "green premium" in Israel, based on a novel comparative calculation method developed to examine how much ‘green’ building certification raises an apartment's price. We also examine how economically profitable it is to purchase a 'green' apartment for the homebuyer and for the Israeli economy overall. Finally, through a case study in Tel Aviv, we shed light on how the implementation of environmentally certified housing may lead to gentrification.