Willingness-to-pay for energy efficient homes: New insights from the 2022 energy crisis in the United Kingdom

Improving the energy efficiency of the housing stock is essential for decarbonising the housing sector. However, achieving large-scale improvements requires substantial private investment, underscoring the importance of housing market incentives. An extensive literature shows a positive willingness-to-pay (WTP) for housing energy efficiency. However, the methodological issue of omitted variable bias (OVB) has weakened claims of a causal effect. It is also unclear whether any WTP reflects a concern with energy costs or a more symbolic “green” consumption. The recent exogenous shock of the 2022 global energy crisis offers a novel opportunity to examine both. If WTP changes significantly after the energy crisis, it effectively removes OVB issues and indicates that WTP for energy efficiency is driven (at least in part) by energy cost savings. Using over 170,000 listings for second-hand house sales in Greater Manchester, UK (2017–24), we model WTP for energy efficiency before and after the energy crisis using multilevel hedonic regressions. We find that WTP for more energy efficient homes increased after the energy crisis, largely because the penalty for the most inefficient homes increased. These results confirm the causal interpretation of the relationship between house prices and energy efficiency and indicate that consumers are motivated at least in part by energy cost savings. These findings suggest that policymakers could strengthen the WTP by providing related regulations or incentives, promote housing energy efficiency by focussing on its financial benefits, as well as support financially vulnerable households to ensure an equal transition to sustainable housing. • Among the first analyses exploring change of WTP for energy-efficient homes after the 2022 energy crisis. • The first study confirming causal interpretation and mechanism of WTP. • WTP increased after the energy crisis, primarily due to a greater “brown discount” for less efficient properties. • Omitted variables cannot explain the increased price premium after the crisis, strengthening the causal interpretation. • People are motivated by energy cost savings, not just a desire to signal “green values”.