Do Homebuyers Value Energy Efficiency? Evidence From an Information Shock

Arpita Ghosh, Brendon McConnell and Jaime Millán-Quijano
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Arpita Ghosh: Department of Economics, University of Exeter

No 2402, Discussion Papers from University of Exeter, Department of Economics

Abstract: We study the housing market response to a country-wide policy that mandated the provision of energy efficiency information with all marketing material at the time of listing. Using the near universe of housing sales in England and Wales, we match in the energy efficiency status of the property from Energy Performance Certificates data. We develop a conceptual framework that makes clear the key channels through which the policy may impact house prices - an information-driven salience channel and a market valuation channel. We provide causal evidence of homebuyers' willingness to pay for a higher energy rated property, documenting a 1-3% premium to a higher energy efficiency rating at the national level, and a 3-6% premium in the London market. We explore a set of key margins along which homebuyers can respond, ruling out as explanations both a consumption channel and an information channel. We conclude that the elevated EPC-rating premiums are driven by a market valuation channel, a conclusion for which we provide empirical support. Such a conclusion is of key policy importance, as it suggests market-facing energy efficiency regulations can increase demand for more energy efficient housing, even in absence of any discernible demand-side consumption or information effects.

Keywords: hedonic price models; energy performance certificates; real estate (search for similar items in EconPapers)
JEL-codes: K32 Q48 R38 (search for similar items in EconPapers)
Date: 2024-01-16
New Economics Papers: this item is included in nep-dcm, nep-ene and nep-ure
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