Energy Performance Certificates and Its Capitalization in Housing Values in Sweden

Mats Wilhelmsson

doi:10.3390/su11216101

Abstract

The impact on energy performance certificates on housing prices has been investigated extensively in recent years. However, the results of these investigations are mixed. We add to the literature by more specifically controlling for potential biases, by employing a combination of alternative approaches to estimate the causal relationship between house prices and energy performance certificates. We use a traditional hedonic modeling approach, but we additionally employ propensity score methods to be able to compare treated houses with a control group. We also investigate the impact of the outliers, spatial dependency, and parameter heterogeneity of our estimates. Moreover, we use the quantile regression technique to test the hypothesis that the capitalization effect varies across the price distribution. Our results, analyzing more than 100,000 observations, indicate there is an upward bias if one is not controlling for outlier and selection bias. Regardless of the propensity score method approach, the results are lower than a model (around 3 percent capitalization, compared to 6 percent). However, our results do not support that the impact of energy performance certificates varies in the price distribution. Consequently, the certificates are not differently capitalized in the high-end housing price segment. Finally, our results support the hypothesis that the energy performance certificate should be more capitalized into house prices in the northern and colder parts of Sweden than in the southern regions.

Highlights

The importance of housing in general, and housing energy consumption, on climate change cannot be underestimated
Statistics Sweden has estimated that household living cost as a percentage of disposable income is around 23 percent in 2014, and 5 percent of that is due to energy cost [3]
We attempted to add to the literature by controlling for different types of biases

Summary

Introduction

The importance of housing in general, and housing energy consumption, on climate change cannot be underestimated. The building sector accounts for as much as 40 percent of total energy consumption [1]. According to statistics from European Statistical Office (Eurostat) [1], the residential sector represents 25 percent of final energy consumption in the EU. On average, 65 percent of final energy consumption in the residential sector goes to heating [1]. A large proportion of household disposable income. Energy cost as a percentage of total household expenditures has increased. Statistics Sweden has estimated that household living cost as a percentage of disposable income is around 23 percent in 2014, and 5 percent of that is due to energy cost [3]. Long-term energy efficiency policies like energy performance certificates or energy labeling of houses can play an essential role in decreasing greenhouse gas emissions from the residential sector and potentially reduce the overall cost of energy for households

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