The Impact of LEED Neighborhood Certification on Condo Prices

Abstract

The U.S. Green Building Council offers LEED certification for existing and new neighborhood developments that meet sustainable urban development standards. Features of sustainable urban development have been found to positively affect residential sales prices. We investigate whether the intangible labeling effects of LEED neighborhood certification add a premium to the sales prices of LEED and non‐LEED–certified condos. Using a quasi‐experiment, transaction data from Portland, Oregon, and a spatio‐temporal autoregressive (STAR) model, we find no evidence that the intangible labeling effects of LEED neighborhood certification directly or indirectly affect sales prices. Our results suggest that, contrary to LEED building certification, which we find adds a premium to condo sales prices, the LEED neighborhood label by itself fails to add value for condo buyers. Explanations for our findings include market acceptance, neighborhood delineation issues and the free rider problem as it relates to public goods.