Is energy performance too taxing?

Over the past decade, there has been an increasing policy focus on improving the environmental performance of the housing stock. Following the Kyoto Protocol, the reduction of energy consumption attributable to buildings is a key Government policy objective. The housing sector has therefore observed a paradigm shift with increasing emphasis on energy efficient housing becoming a new orthodoxy. A side effect of this has been the mandate for ‘compulsory’ Energy performance certificates (EPCs) as new laws are promulgated relating to the need to conform with energy performance levels. As from 2018, all properties with EPC levels F and G will not be ‘lettable’ and this is likely to be extended to properties for sale. With increasing utility costs to customers, purchasers and authorities are becoming increasingly concerned with the running cost of properties and whether property energy improvements will be capitalized into sale value. Indeed, how energy efficiency is valued in the residential property market in terms of resale or appraisal value is a growing concern (McNamara, 2008; Sayce et al., 2010). Notwithstanding this, the relationship between energy performance and property value remains nebulous, complex and under-researched. In Europe, few studies investigate the effect of energy performance rating on residential property value with limited information and research in the UK and Northern Ireland context. This research uses hedonic analysis to investigate the relationship between EPCs and property sale price within the Belfast housing market. The findings show that there is a positive statistically significant relationship – however, this is complex and subject to omitted variable bias and endogeneity problems. In addition, there appears to be a rural urban divide with regards to where policy should target. We further develop a multiplicative model (CAMA) to assess the energy performance of properties across NI using CO2 kg m2. The results show that introduction of a ‘green’ tax may indeed help foster behavioural change, but is in no way a panacea.