Housing Market Beliefs of Energy Efficiency

This paper provides the first causal evidence of how energy efficiency policies shape housing markets in developing economies, exploiting the staggered rollout of South Africa's National Energy Efficiency Strategy (NEES). Using a quasi-experimental design and nationally representative household stated preferences, we show that low-income households adopting NEES-compliant appliances experienced a 3.3 percentage points increase in house prices and an 8 percentage point rise in rents. Dynamic event studies reveal persistent effects, with prices rising by 12 percentage points and rents by 21 percentage points seven years post-intervention. Mechanism analyses indicate these gains are driven by direct capitalisation of energy-efficient upgrades, remittance-financed appliance purchases, reduced air pollution, and linked income channels. Effects are concentrated in urban areas and among Black and Coloured homeowners, underscoring heterogeneous socioeconomic impacts. The results highlight energy efficiency's role as a “first fuel” for sustainable development, demonstrating its potential to simultaneously mitigate climate externalities and stimulate housing market dynamism. Policy implications emphasize targeting rebate programs to low-income households, integrating efficiency incentives with broader social policies, and monitoring rebound effects to maximize net emissions reductions. By bridging the gap between environmental economics and housing market research, this study offers actionable insights for designing equitable climate policies in resource-constrained settings.