Energy performance certificates impact on rent prices in the Czech Republic: Two-stage least squares approach

The European Union (EU) has identified the building sector to address reduction in energy consumption, with buildings operation contributing close to half of total energy use in the EU. To address this, various EU member states, including the Czech Republic, have implemented energy efficiency subsidy programs. The Czech real estate sector plays a significant role in the economy, contributing close to a tenth of the country's GDP, yet the impact of energy efficiency on rental prices remains underexplored. This study investigates the relationship between energy performance certificates (EPCs) and apartment rental prices in the Czech Republic. Using a revised and cleaned dataset of over 30,000 rental observations scraped from the largest Czech real estate portal, we analyze rental prices across three categories of apartment conditions: newly built units, renovated units, and units in good condition without major renovations. Employing a two-stage least squares (2SLS) regression approach to account for endogeneity, the results reveal a significant positive relationship between energy efficiency and rental prices, consistent across all models. Newly built units show the highest premium for energy efficiency, while renovated and good-condition units demonstrate a larger decrease of premiums respectively. Regional GDP, heating type, ownership structure, and building amenities also significantly influence rental prices. The findings align with trends observed in other European markets and underscore the economic and environmental benefits of energy-efficient housing.