What Drives the Premium for Energy-Efficient Apartments – Green Awareness or Purchasing Power?

Abstract

We analyze whether lower rents for energy-inefficient apartments reflect tenants' willingness to pay due to a higher green awareness, purchasing power, or energy consumption costs. Based on a German rental apartment dataset from Q1 2007 to Q1 2019, we use interaction terms for socioeconomic characteristics in a hedonic regression model. We find that rents are lower for apartments with higher energy consumption, even in neighborhoods with lower levels of green awareness. This relationship is stronger in neighborhoods with higher purchasing power, such that communities with low levels of green awareness and high purchasing power show the steepest negative slope for increasing energy consumption (−8.6% from the highest to lowest rating). Thus, the rent-decreasing effect of purchasing power is higher than that of green awareness. Splitting the entire period into smaller windows, we find that the interaction effect of green awareness has emerged in the most recent years (2017-2019). This may be driven by changes in regulation, which have made it easier for tenants to assess the energy consumption before they rent, or by a general increase in green awareness over this period.

Value activation to increase consumers' intention to purchase green apartments

“…Li et al, 2018;Yau, 2012;Portnov et al, 2018;Njo et al, 2021). As clarified by the research, consumers' willingness to pay for green housing was determined by their demographic characteristics including gender, age, education, or income (Li et al, 2018;Yau, 2012;Hu et al, 2014b), some psychological variables such as environmental attitude (Yau, 2012), environmental awareness, perceived behavioural control, subjective norm (Njo et al, 2021;Pommeranz and Steininger, 2021;Zahan et al, 2020), perceived benefits and costs of green housing (Zhao and Chen, 2021) or external attributes of green apartments (Njo et al, 2021;Zalejska-Jonsson, 2014;Park et al, 2013). For such reasons, an understanding of factors affecting consumers' green apartment purchase intention is of great importance for marketers to design green marketing strategies for the successful promotion of green apartments.…”

Effects of rooftop solar on housing prices in Australia

“…Socioeconomic controls are often included in hedonic studies in an attempt to account for differences in the purchasing power of households. For instance, income is often included given that higher-income households are likely to be able to better afford various home improvements (Pommeranz and Steininger 2020). We argue that household financial assets are perhaps even more important given they are the stock of liquid resources that can be used for investments (Steegmans and Hassink 2017).…”

Green Bonds’ Reputation Effect and Its Impact on the Financing Costs of the Real Estate Sector

“…The recent surge in demand for energy-efficient housing by environmentally aware households (Kahn and Kok, 2014;Pommeranz and Steininger, 2021) and for "green offices" by companies (Eichholtz et al, 2010) as well as an increased interest in the acquisition of "green assets" by investors (Baker et al, 2018) supports the financing of the required green investments in the real estate sector. As one example, the Swedish real estate company Castellum, active in commercial real estate, succeeded to be included as the first Nordic company of the property and construction sector in the Dow Jones Sustainability Index (DJSI).…”