Measuring the Effects of Environmental Certification on Residential Property Values - Evidence from Green Condominiums in Portland, U.S.

Abstract

Green building, as an environmentally responsible and resource-efficient product, has emerged in recent decades. Along with the growing interest in green building design and operating practices, a number of green building certification standards and rating systems have been developed by different organizations worldwide. Those rating systems allow government regulators, building professionals, and consumers to embrace green building with confidence. Many recent studies find that LEED and Energy Star certified commercial buildings gain significant rental and sales price premiums and have higher occupancy rates. However, little research has been conducted to measure the market value of certified multi-family residential buildings, for instance, green condominiums. This study investigates the price effects of LEED certification on condominium real estate assets in a local housing market, in this case Portland, Oregon. The overall dataset is developed by combining information from Metro's Regional Land Information System (RLIS) and LEED certifications by the U.S. Green Building Council (USGBC). A hedonic pricing model is employed to measure the effects of certification levels on sales prices. The model results indicate that, compared to non-certified condominiums in Portland, green certified properties have a 5.8 percent sales price premium on average. The result of this study confirms that LEED condominiums exhibit higher sales prices controlling for location-and property-specific factors.

Meta-Analysis of Price Premiums in Housing with Energy Performance Certificates (EPC)

“…Other studies, however, have obtained negative or contrary results. For example, Yang [8] obtained a premium of 16% on new housing having a LEED qualification in Portland (United States). On the other hand, Yoshida and Sugiura [9] found a negative premium of 10.80% in housing with a Green Building qualification in Tokyo (Japan).…”

“…It is a voluntary and private certification system. This certification system assesses eight categories or topic areas [4]: (1) Location and transportation; (2) sustainable sites; (3) water efficiency; (4) energy and atmosphere; (5) materials and resources; (6) indoor environmental quality; (7) innovation; and (8) regional priority. The method used is based on the scoring of distinct categories, with the results of each category adding up to obtain an overall score.…”

A Conceptual Framework of Green Certification Impact On Property Price

“…c) In valuing low-energy houses, the expected price or rate of returns becoming challenges to the appraiser because lack of reliable modelling tools, historical statistical and case specific data [11]. Mostly, researches towards the green certification impact are involving both either a mandatory program or a voluntary program [2,3,7,8,9,24]. However, limited studies have been done on green residential properties and this is leading to the research on the greenness effect in residential market.…”

“…Most of the studies highlight green certification and utilize the hedonic model to assess the effect on property price. Surveys conducted by several researchers [2,3,8,14,24] using hedonic model focus on their local green rating such as Green Mark, LEED, Energy Star and property transaction price.…”

“…Based on the ideas of few research, structural attributes are size of building /floor, stories of building and age [2,3,13,14,18,24]. Another attributes that are mostly used are location and neighborhood for instance, view and facilities [2,8,25] and time attributes such as year of transaction price take place [2,3,8,13,24].…”