Tearing down the information barrier: the price impacts of energy efficiency ratings for buildings in the German rental market

Improving the energy efficiency levels of the housing stock is of particular concern in the private rental market where capital costs and utility cost savings are not shared in equal measure by landlords and tenants. This problem is particularly pronounced in the German housing market with its predominance of rented accommodation over owner occupancy. The present study is the largest to date to investigate the effect of energy efficiency ratings on rental values. Using a semiparametric hedonic model and an empirical sample of nearly 760 thousand observations across 403 local markets in Germany with full hedonic characteristics, we find evidence that energy-efficient rental units are rented at a premium. However, this effect is not confirmed for the largest metropolitan housing markets. In a second step, a survival hazard model is estimated to study the impact of the energy ratings on time-on-market. It is found that energy inefficient dwelling have longer marketing periods and are hence less liquid than their more energy efficient counterparts.