An Empirical Assessment of the Value of Green in Residential Real Estate

Although there remains some controversy regarding the issue of humaninduced climate change, there is always a market for money-saving devices, including those that increase energy and water use efficiency.1 There are also nonpecuniary benefits of human comfort when a residence maintains its temperature with less cycling of heating and cooling devices, so it is reasonable that buyers would pay for comfort items as well as energy saving items.2 Increased insulation and multiglazed windows, which increase energy efficiency, will also make a home quieter. It is also likely that some environmentally conscious buyers will pay a premium, even in the absence of dollar savings or direct human comforts, to meet personal lifestyle choices that include minimizing their individual environmental impact. While “green” is a term that is colloquially used to mean “environmentally friendly,” it has more specific meaning when it is applied to building certifications and ratings. There are a number of green certifications that result from a specified and documented process to achieve the given certification; prominent examples include the Leadership in Energy and Environmental Design (LEED) certification3 and the National Association of Home Builders’ National Green Building Standard (NGBS) certification.4 Energy efficiency is an important subset of green building.5 Popular measures for overall energy efficiency include the Energy Star-qualified homes, and homes rated using the Home Energy Rating System (HERS).6 In addition, buildings may have green or energy-efficient