Energy Efficiency and Economic Value in Affordable Housing

Abstract

Strong rental protection in many jurisdictions prevents affordable housing institutions from recouping their investment in the improved energy efficiency of dwellings. This impedes the path towards increased environmental performance in affordable housing. In the Netherlands, affordable housing institutions regularly sell from their housing stock, and if they can sell their energy efficient dwellings at a premium, this may stimulate investments in the environmental performance of homes.

We analyze the value effects of energy efficiency in the affordable housing market, by using a sample of homes sold by Dutch affordable housing institutions in the period between 2003 and 2013. We use Energy Performance Certificates to determine the value of energy efficiency in these transactions. We document that dwellings with high energy efficiency sell for 1.9 to 7.2 percent more compared to otherwise similar dwellings with low energy efficiency. This implies a premium of some 3,000 to 11,400 euros for highly energy efficient affordable housing.

Keywords: affordable housing, energy efficiency, energy performance certificates

JEL Classification: R31, Q41, Q5