Estimating the Impact of the Minimum Energy Efficiency Standard on Property Prices

Eleni Sandi
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Eleni Sandi: University of Warwick

Warwick-Monash Economics Student Papers from Warwick Monash Economics Student Papers

Abstract: The Minimum Energy Efficiency Standard (MEES) aims to improve the energy efficiency of privately rented properties in England and Wales. Previous literature identifies this policy intervention as a driver of transition risk as it devalues substandard real estate. This paper reveals that MEES also devalues neighbouring houses meant to be una↵ected by the policy, i.e. above-standard properties. The study leverages a dataset that combines energy efficiency and transaction data at the postcode level to capture this spatial externality. A concentration measure for sub-standard properties within a neighbourhood is constructed, which is applied to aggregate and property level analyses using a difference-in-difference specification. The aggregate analysis reveals that an incremental increase in the concentration of sub-standard housing within a postcode sector after introducing the standard leads to a 20.1% decrease in aggregate prices for above-standard houses. A repeated sales regression run on property-level data finds that an increase in concentration leads to a more plausible 4.03% decrease in prices for above-standard properties. These results imply potential problems for homeowners who may find themselves in negative equity due to the aggregate price drop, which may also negatively impact their pro-environmental investments

Keywords: C43; Q54; Q58; R31 JEL classifications: Climate Policy; Transition Risk; House Prices; Concentration Measure (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-des, nep-eff, nep-ene, nep-env, nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:wrkesp:47

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