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Evidence of rational market valuations for home energy efficiency

Author

Listed:
  • Nevin, Rick
  • Watson, Gregory

Abstract

According to this study, residential real estate markets assign to energy-efficient homes an incremental value that reflects the discounted value of annual fuel savings. The capitalization rate used by homeowners was expected to be 4%-10%, reflecting the range of after-tax mortgage interest rates during the 1990s and resulting in an incremental home value of $10 to around $25 for every $1 reduction in annual fuel bills. Regression analysis of American Housing Survey data confirms this hypothesis for national and metropolitan area samples, attached and detached housing, and detached housing subsamples using a specific fuel type as the main heating fuel.

Suggested Citation

  • Nevin, Rick & Watson, Gregory, 1998. "Evidence of rational market valuations for home energy efficiency," MPRA Paper 35343, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:35343
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    File URL: https://mpra.ub.uni-muenchen.de/35343/1/MPRA_paper_35343.pdf
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    References listed on IDEAS

    as
    1. Longstreth, Molly, 1986. "Impact of consumers' personal characteristics on hedonic prices of energy-conserving durables," Energy, Elsevier, vol. 11(9), pages 893-905.
    2. Laquatra, Joseph, 1986. "Housing market capitalization of thermal integrity," Energy Economics, Elsevier, vol. 8(3), pages 134-138, July.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Megat Mohd Ghaza Rahman & Maryanti Mohd Raid & Asmma' Che Kasim & Khadijah Hussin, 2015. "Impact Of Indoor Environmental Quality And Innovation Features On Residential Property Price And Rent In Malaysia: A Review," ERES eres2015_133, European Real Estate Society (ERES).
    2. repec:sae:urbstu:v:54:y:2017:i:14:p:3218-3238 is not listed on IDEAS
    3. Berry, Stephen & Davidson, Kathryn, 2015. "Zero energy homes – Are they economically viable?," Energy Policy, Elsevier, vol. 85(C), pages 12-21.
    4. Palmer, Karen & Walls, Margaret & Gordon, Hal & Gerarden, Todd, 2011. "Assessing the Energy-Efficiency Information Gap: Results from a Survey of Home Energy Auditors," Discussion Papers dp-11-42, Resources For the Future.
    5. Konstantin A Kholodilin & Andreas Mense & Claus Michelsen, 2017. "The market value of energy efficiency in buildings and the mode of tenure," Urban Studies, Urban Studies Journal Limited, vol. 54(14), pages 3218-3238, November.
    6. Hernandez, Patxi & Kenny, Paul, 2011. "Development of a methodology for life cycle building energy ratings," Energy Policy, Elsevier, vol. 39(6), pages 3779-3788, June.
    7. Lester, T. William, 2013. "Dedicating new real estate transfer taxes for energy efficiency: A revenue option for scaling up Green Retrofit Programs," Energy Policy, Elsevier, vol. 62(C), pages 809-820.
    8. Bruegge, Chris & Carrión-Flores, Carmen & Pope, Jaren C., 2016. "Does the housing market value energy efficient homes? Evidence from the energy star program," Regional Science and Urban Economics, Elsevier, vol. 57(C), pages 63-76.
    9. Kaza, Nikhil & Quercia, Roberto & Sahadi, Robert J., 2014. "Home energy efficiency and mortgage risks: an extended abstract," Community Development Investment Review, Federal Reserve Bank of San Francisco, issue 01, pages 063-069.
    10. Lee, Minhyun & Hong, Taehoon & Koo, Choongwan, 2016. "An economic impact analysis of state solar incentives for improving financial performance of residential solar photovoltaic systems in the United States," Renewable and Sustainable Energy Reviews, Elsevier, vol. 58(C), pages 590-607.
    11. Koirala, Bishwa S. & Bohara, Alok K. & Berrens, Robert P., 2014. "Estimating the net implicit price of energy efficient building codes on U.S. households," Energy Policy, Elsevier, vol. 73(C), pages 667-675.
    12. Nevin, Rick & Jacobs, David / E. & Berg, Michael & Cohen, Jonathan, 2007. "Monetary benefits of preventing childhood lead poisoning with lead-safe window replacement," MPRA Paper 35340, University Library of Munich, Germany.
    13. Nevin, Rick & Jacobs, David / E., 2006. "Windows of opportunity: lead poisoning prevention, housing affordability, and energy conservation," MPRA Paper 35342, University Library of Munich, Germany.
    14. Nevin, Rick, 2010. "Energy-efficient housing stimulus that pays for itself," Energy Policy, Elsevier, vol. 38(1), pages 4-11, January.
    15. Berry, Stephen & Davidson, Kathryn, 2016. "Improving the economics of building energy code change: A review of the inputs and assumptions of economic models," Renewable and Sustainable Energy Reviews, Elsevier, vol. 58(C), pages 157-166.
    16. Schweitzer, Martin & Tonn, Bruce, 2003. "Non-energy benefits of the US Weatherization Assistance Program: a summary of their scope and magnitude," Applied Energy, Elsevier, vol. 76(4), pages 321-335, December.
    17. repec:eee:rensus:v:75:y:2017:i:c:p:1066-1080 is not listed on IDEAS

    More about this item

    Keywords

    Energy; Housing;

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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