By How Much Does a Green Label Increase the Value of a House?

Do ‘green’ houses with energy saving features actually sell for more than houses without?

A new economic study by professors Matthew E. Kahn of UCLA and Nils Kok of Maastricht University in the Netherlands looked at the sale of 1.6 million houses in California from 2007 to 2012 to try and determine the effect a ‘green’ label has on the prices of a house.

They found that a green certificate on average adds about nine percent to the sale price of a house, and that buyers in areas with lots of hybrid cars (presumably indicating an affinity to environmentally friendly products) will pay higher premiums for ‘green’ houses, than people from areas with fewer hybrid vehicles.

No correlation was found between willingness to pay the premium and the local areas utility rates. In other words they did not think of paying more for the house in order to reduce energy bills in an area with high utility rates.

The nine percent premium that the study found is similar to the premium found in European studies. Energy efficient houses in Europe are far more common, and a house rated ‘A’ by the EU can expect an average premium of ten percent added to the value of the property.

In the US the National Association of Realtors has fought the adoption of any form of mandatory energy efficiency rating scheme, claiming that such a system could have negative effects in the market; possibly afraid of the negative impacts on sale values for houses that are energy inefficient.

On the other hand, the National Association of Home Builders is all for the scheme, believing that it will offer a selling advantage to newly constructed houses.

By. James Burgess of Oilprice.com