The dissertation deals with the valuation of environmental goods under uncertainty and the capitalisation of energy efficiency in housing prices and rents. It assembles five papers. The first paper (Chapter 1) draws attention to two important elements that are not covered by the standard hedonic pricing framework: relocation costs and uncertainty. The paper develops a theoretical model that highlights key aspects of local housing markets. The model shows that relocation costs are related to uncertainty due to the option value of waiting. Following Fischel (2001), this phenomenon could explain why solving facility siting controversies is difficult. Moreover, the model suggests that the implicit price of environmental quality increases with uncertainty even if agents are risk-neutral. It implies that house owners suffer more from uncertainty than renters because the former group faces much higher relocation costs. The model serves as theoretical basis for two empirical applications in Chapters 2 and 3. The second paper (Chapter 2) examines the effects of the expansion of Berlin Airport on the prices of houses and flats located under the planned flight paths. The focus lies on the role of expectations of aircraft noise. It is argued that the publication of the flight paths can be seen as an exogenous event. It provides reliable information to local residents and potential home buyers in a situation that is characterised by uncertainty. The flight paths greatly influence expectations with respect to the noise level. As a result, property listing prices were reduced substantially in the affected areas directly after the flight paths were published. The loss of value of the affected properties was found to be 9.6% on average within a slant distance of 3 km from a planned flight path. If the flight altitude is below 1000 m, the discount is between 11.8 and 12.8%, whereas for higher flight altitudes the average decline in prices is estimated to be 8.3%. Furthermore, projected flight path utilisation or official noise projections did not seem to influence property prices much, in line with predictions from the model in Chapter 1. Following the critique of Pinkse and Slade (2010) and Gibbons and Overman (2012), the third paper (Chapter 3) develops an instrument for the estimation of local price effects of cell phone base stations in an urban area. The instrument is derived from the spatial structure of the network. Such a strategy could be useful in other contexts in which location choice is endogenous but depends on an existing network structure. Proximity to cell phone base stations significantly decreases listing prices, but there does not seem to be an effect on rents. This can either be interpreted as a result of financial risk carried by owners or of market power of landlords. Furthermore, the estimations reveal that spatial econometric methods have limited capability of identifying causal relationships. Chapters 4 and 5 of the dissertation deal with the capitalisation of energy efficiency in property prices. Concerns about global warming and growing scarcity of fossil fuels require substantial changes in energy consumption patterns and energy systems, as targeted by many countries around the world. One key element to achieve such transformation is to increase energy efficiency of the housing stock. In this context, it is frequently argued that private investments are too low in light of potential energy cost savings. In Chapter 4, differences in the valuation of energy efficiency between rental and owneroccupied dwellings are investigated. Heterogeneous incentives to invest in energy efficiency, especially for owner-occupants and landlords, may serve as one explanation for relatively low investment in the housing stock. This is particularly important for countries with a large rental sector, like Germany. Nevertheless, previous literature largely focuses on the pay-offs owner-occupants receive, leaving out the rental market. The paper addresses this gap by comparing the capitalization of energy efficiency in selling prices and rents, for both types of residences. For this purpose data from the Berlin housing market are analysed using hedonic regressions. The estimations show that energy efficiency is well capitalised in dwelling prices and rents. The comparison of implicit prices and the net present value of energy cost savings/rents reveals that investors anticipate future energy and house price movements reasonably. However, in the rental segment, the value of future energy cost savings exceeds tenants’ implicit willingness to pay by factor 2.5. This can either be interpreted as a result of market power of tenants, uncertainty in the rental relationship, or the “landlord–tenant dilemma”. A second important question related to the valuation of energy efficiency is whether house owners are aware of potential energy cost savings. A priori, it is not clear whether “green” marketing or cost considerations are responsible for correlations between energy efficiency of a building and its selling (or listing) price. The German “Energy Performance of Buildings Directive” (Energieeinsparverordnung) requires sellers on the housing market to provide detailed information on yearly energy consumption per square metre. This paper uses variation of expected heating costs from local fuel prices, climatic conditions, and fuel types to analyse the relationship between expected energy cost savings from energy efficient building structure and house prices in a data set of listing prices from all regions of Germany. Furthermore, the role of building age for the value of energy efficiency is considered. Results suggest that market participants are aware of the investment dimension of energy efficiency improvements, but not all important aspects are taken into account.
