Housing Wealth and Residential Energy Consumption in the UK

Abstract

Housing wealth effect often manifests as a positive relationship between consumption and perceived housing wealth (e.g., the perceived value of houses). When the perceived value of a property rises, homeowners may feel more comfortable and secure about their wealth, causing them to spend more. This study adopts a behavioural approach to verify if this relationship holds true for residential energy consumption in the UK. While controlling for property characteristics as well as a large number of demographic, socioeconomic and energy-use behaviour variables, we identified a significant relationship between housing wealth and energy consumption. Our models also considered psychological biases in energy consumption behaviours such as the framing effect. Our findings not only shed light on the behavioural aspects of housing wealth effect on residential energy consumption, but also demonstrates the possibility and potential to ‘nudge’ households towards energy conservation. Most importantly, we also provide empirical evidences on the intriguing relations among housing wealth, residential energy consumption, and fuel poverty. We argue that overlooking the presence of fuel poverty risks a superficial interpretation of any identified housing wealth effect on residential energy consumption. The fuel vulnerable group should be analysed separately from the rest of the population due to their different energy consumption patterns. This finding is particularly helpful to design and implement energy consumption policies that can strike a balance between social justice and economic efficiency.