Sixteenth International Conference on Environmental, Cultural, Economic & Social Sustainability

Abstract

Green buildings (GBs) are rapidly becoming a national priority in many countries worldwide. This trend is sustained by energy conservation needs and growing concern for environmental sustainability. Many studies suggest GBs bring multiple benefits to homebuyers. However, the lack of knowledge or uncertainty about these benefits, combined with the proven presence of nominal price premium for GBs, may prevent or inhibit potential homebuyers from entering the GB market. Therefore, governmental incentives may be required to facilitate the housing market transition from conventional to green. This study serves the dual purpose of examining the size of the price premium that potential homebuyers in Israel are willing to pay for GBs, and investigating the potential impact of prevalent GB policy instruments on the premium’s size. Findings from a nationwide online survey among a representative sample of potential homebuyers indicate an agreeable GB price premium in the range of 7-10%. Expected maintenance savings and better familiarity with GB benefits are found to be positively associated with premium size. However, counterintuitively, economic incentives, such as tax breaks and subsidized loans, are found to result in lesser, rather than greater, willingness to pay the GB price premium. These results indicate that financial incentives to homebuyers may be counterproductive by generating emotive and opposite responses that may be opposite to the intended ones. The study suggests a mix of financial and non-financial incentives as stimulus for GB choice. The study also emphasizes the importance of evaluating unexpected consequences of future interventions in the GB market.