Are Energy Efficiency Ratings Ignored in the German Housing Market? – Evidence from a Large-Sample Hedonic Study
26 Pages Posted: 22 Jun 2016 Last revised: 17 Jan 2017
Date Written: June 22, 2016
Improving the energy efficiency levels of housing is of particular concern in the private rental market where capital costs and subsequent utility cost savings are not shared in equal measure by landlords and tenants. This problem is particularly pronounced in Germany where rental properties make up the majority of the housing stock. The present study is the largest and most comprehensive study of the value of energy efficiency in the German housing market and investigates the effect of energy efficiency ratings on rental values across 412 markets in Germany. Using a semiparametric hedonic model and an empirical sample of nearly 500k observations with full hedonic characteristics, we find strong evidence that energy-efficient rental units are rented at a premium. A survival hazard model is then used to study the impact of the ratings on time-on-market. It is found that energy-efficient rental properties tend to lease up more quickly than their non-efficient peers. This study provides a very robust framework for policy makers and property companies for understanding how energy efficiency and expected utility costs of a rental property affect asking and effective rents.
Keywords: Energy efficiency, residential buildings, Hedonic model, Hazard model, German housing
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