Impact of an energy renovation obligation for homebuyers on house prices

This article analyses the impact of the Flemish energy renovation obligation for homebuyers on house prices. This policy was introduced in 2023 and obliges buyers of the most energy-inefficient homes to renovate within five years from purchasing the property in order to obtain at least a class D label. By applying a difference-in-differences technique and leveraging a unique dataset of dwelling characteristics, we find that energy-inefficient houses in the Flemish Region became about 2% cheaper as a result of this renovation obligation, both relative to similar houses in the Walloon Region and to those with a class D energy label in the Flemish Region. The reasons for this only limited effect are that a majority of buyers of energy-inefficient houses were renovating their properties to at least a class D level in any case and that this renovation cost seems to already have been largely factored into the price. As the Flemish Region is the only region in the world to have introduced an energy renovation obligation for homebuyers, our findings may be of interest to the many other countries that are considering a similar policy.