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Is Energy Efficiency Capitalized into Home Prices? Evidence from Three US Cities

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  • Walls, Margaret

    () (Resources for the Future)

  • Palmer, Karen

    () (Resources for the Future)

  • Gerarden, Todd

Abstract

We look for evidence of capitalization of energy efficiency features in home prices using data from real estate multiple listing services (MLS) in three metropolitan areas: the Research Triangle region of North Carolina; Austin, Texas; and Portland, Oregon. These home listings include information on Energy Star certification and, in Portland and Austin, local green certifications. Our results suggest that Energy Star certification increases the sales prices of homes built between 1995 and 2006 but has no statistically significant effect on sales prices for newer homes. The local certifications appear to have larger effects on sales prices, and that effect holds for both newer and older homes. The estimated home price premiums from certification imply annual energy cost savings that are sizeable fractions of estimated annual energy costs for homes in our sample, in some cases even above 100 percent. This suggests that the certifications either embody other attributes beyond energy efficiency that are of value to homebuyers or that buyers are overpaying for the energy savings. Further research is needed to better understand how consumers interpret home certifications and how they value the combination of “green” characteristics that many of those certifications embody.

Suggested Citation

  • Walls, Margaret & Palmer, Karen & Gerarden, Todd, 2013. "Is Energy Efficiency Capitalized into Home Prices? Evidence from Three US Cities," Discussion Papers dp-13-18, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-13-18
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-13-18.pdf
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    References listed on IDEAS

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    Cited by:

    1. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins & Robert C. Stowe, 2015. "An Assessment of the Energy-Efficiency Gap and Its Implications for Climate Change Policy," Working Papers 2015.28, Fondazione Eni Enrico Mattei.
    2. 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.
    3. Ramos, A. & Gago, A. & Labandeira, X. & Linares, P., 2015. "The role of information for energy efficiency in the residential sector," Energy Economics, Elsevier, vol. 52(S1), pages 17-29.
    4. Qiu, Yueming & Colson, Gregory & Grebitus, Carola, 2014. "Risk preferences and purchase of energy-efficient technologies in the residential sector," Ecological Economics, Elsevier, vol. 107(C), pages 216-229.
    5. 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.
    6. Wee, Sherilyn, 2016. "The effect of residential solar photovoltaic systems on home value: A case study of Hawai‘i," Renewable Energy, Elsevier, vol. 91(C), pages 282-292.
    7. Jacobsen, Grant D., 2015. "Do energy prices influence investment in energy efficiency? Evidence from energy star appliances," Journal of Environmental Economics and Management, Elsevier, vol. 74(C), pages 94-106.

    More about this item

    Keywords

    Energy Star homes; energy efficiency; green certifications; hedonic model;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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