Non-Institutional Factors That Contribute to the Green Building Premium

Abstract

This study examines the non-institutional factors that affect the green building premium (GBP). Residential properties are chosen for empirical analysis since they are free from institutional factors such as corporate social responsibility (CSR). The study adopts both Mahalanobis Distance Matching (MDM) and Propensity Score Matching (PSM) to identify the treatment observations (buildings with a green building certificate) and the control observations (non-green buildings). The results are robust across the two methods. The study found that residential buildings with green certificates command a premium and that this premium does not decline over time, which suggests that consumers are willing to pay a GPB in the absence of institutional mandatory requirements. Furthermore, the GBP is higher but with a slower growth rate in higher-income areas, which is consistent with the post-materialist value theory and the prosperity or affluence hypothesis.