Valuing residential energy efficiency in two Alaska real estate markets: a hedonic approach

Abstract

Alaska households have high home energy consumption and expenditures. Improving the energy efficiency of the housing stock can reduce home energy consumption, thereby reducing home energy expenditures and CO₂ emissions. Improving the energy efficiency of a home may also increase its transaction price if the energy efficiency improvements are capitalized into the value of the home. The relationship between energy efficiency and transaction prices in the Fairbanks and Anchorage, Alaska residential real estate markets is examined. Using a hedonic pricing framework and difference-in-differences analysis, the impact of the Alaska Home Energy Rebate program on the transaction prices of single-family homes in the Fairbanks and Anchorage housing markets from 2008 through 2015 is examined. The results indicate that compared to homes that did not complete the program, homes that completed the program sell for a statistically significant price premium between 15.1% and 15.5% in the Fairbanks market and between 5% and 11% in the Anchorage market. A hedonic pricing framework is used to relate energy efficiency ratings and transaction prices of homes in the Fairbanks and Anchorage residential real estate markets from 2008 through 2015. The results indicate that homes with above-average energy efficiency ratings sell for a statistically significant price premium between 6.9% and 17.5% in the Fairbanks market and between 1.8% and 6.0% in the Anchorage market.