Doing good but not that well? A dilemma for energy conserving homeowners

Abstract

In this paper the issue of market capitalization of energy efficient buildings is addressed by considering single-family housing in Sweden and through analyzing as to what extent the market price for a house is influenced by its energy performance. Are Swedish homeowners doing well by doing good?We make use of information provided by the Swedish energy performance certificates for single-family homes matched with data on the corresponding transaction prices, household characteristics and attributes of the neighborhood. The resulting database, covering about 77,000 individual observations, is used to analyze the relationship between the price of a house and its energy performance by means of a hedonic model. Unlike most other studies the energy performance is decomposed into energy consumption and several other variables characterizing the energy system. The main question addressed is if there is a price premium for energy efficient housing in Sweden.Our results differ from earlier studies and indicate no price premium related to the energy consumption but substantial premiums for housing attributes that improve the energy efficiency. A likely explanation is that prospective buyers of new homes base their expectations about future energy consumption on those attributes rather than on the energy consumption of the previous owner.