Heat Pumps' Impact on Housing Prices and Implications for Policy - - PowerPoint PPT Presentation

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Heat Pumps' Impact on Housing Prices and Implications for Policy - - PowerPoint PPT Presentation

Jan 03, 2023 118 likes •334 views

Heat Pumps' Impact on Housing Prices and Implications for Policy Instruments to Facilitate Electrification and Deep Decarbonization Xingchi Shen a , Pengfei Liu b , Yueming Qiu a , Anand Patwardhan a , Parth Vaishnav c a University of Maryland

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Heat Pumps' Impact on Housing Prices and Implications for Policy Instruments to Facilitate Electrification and Deep Decarbonization

Xingchi Shen a, Pengfei Liu b, Yueming Qiu a, Anand Patwardhan a, Parth Vaishnav c a University of Maryland College Park; b University of Rhode Island; c Carnegie Mellon University * Thanks to generous funding from the Sloan Foundation.
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Electrification and Deep Decarbonization

The energy source of household heating systems in the U.S.  Stabilizing Earth’s temperature will require that we stop burning fossil fuels.  It is more economical and technologically easier to sequester emissions from large sources such as electric power plants.  It is much harder to capture emissions from small distributed sources such as the natural gas furnaces used to heat homes and offices. Source: U.S. Department of Energy, Buildings Energy Data Book 2011
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Heat Pump

  • Air source heat pumps
  • Geothermal heat pumps
  • Water source heat pumps
National, state-level and city-level decarbonization plans have relied on the diffusion of heat pumps:
  • The Dutch government’s plan to electrify buildings and
fully phase out fossil (“natural”) gas by 2050
  • The Irish government’s Climate Action Plan
  • The Finland government’s carbon neutral target by
2035
  • Massachusetts, USA 2019-2021 Three-Year Energy
Efficiency Plan
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SLIDE 4 Data source: Zillow Database The Density of Heat Pump (n/ million people) by County Level in the United States in 08-05-2018
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SLIDE 5 Heat Pump Installation House Value Incentive of Adoption
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SLIDE 6

Objective 1

Research Objectives

we provide the first nation-wide and regional-specific estimations of price premiums resulted from heat pump installations. we explore the relationship between the price premium and residents’ environmental awareness. we compare the price premium with the social and private benefits of a switch to a heat pump and the cost of installing a heat pump.

Objective 2 Objective 3

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Zillow Data

Our dataset includes information for more than 374 million detailed public transaction records across over 2,750 counties for residential and commercial properties since early 1900s. 4TB of data for more than 150 million homes in 51 states from Zillow.

Transaction Data Assessment Data

The data includes property assessment information such as property characteristics, installed heating technology, property addresses, and prior assessor valuations of approximately 200 million parcels in over 3,100counties, via six independent property assessments
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Empirical Approach: DID

  • Treated group: houses that installed a heat pump and were sold at least twice before and after the
installation.
  • Control group: houses keeping using one specific heating system (Coal, Gas, Gravity, Hot Water,
None, Oil, Radiant, Steam, Wood Burning, etc.) and were sold at least twice during a similar time window.
  • Time span: all the transaction records in our analysis is from 2000 to 2018.
  • Exact matching on counties: We match treated houses and control houses that are in the same
counties.
  • Rule out the influence of remodeling: remove the houses that were remodeled after year 2000
(a very small share of total sample) from our sample.
  • We obtain 14,211 houses in the treatment group and 440,168 houses in the control group across the
country covering 23 states.
  • AL, AR, AZ, CO, CT, DE, FL, GA, KY, MD, MI, MN, NC, NE, NV, OH, OK, OR, PA, SC, SD, VA, WA
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Empirical Approach: Two-Way Fixed Effects Model

𝐽𝑜 𝑍 𝑗𝑑𝑢 = 𝛾𝐸𝑗𝑢 + 𝛽𝑆𝑗𝑢 + 𝜒𝑗 + 𝜏𝑑 ∙ 𝜘𝑢 + 𝜈𝑢 + 𝜁𝑗𝑑𝑢 In 𝑍 𝑗𝑑𝑢 is the log of the sales price of house i in time t. (unit: 2018$) 𝐸𝑗𝑢 is the treatment variable. 𝑆𝑗𝑢 is the building age since it was built or remodeled (whichever is later). 𝜒𝑗 is individual fixed effects. 𝜏𝑑 ∙ 𝜘𝑢 is county-by-year fixed effects. 𝜈𝑢 is month-of-year fixed effects. 𝜁𝑗𝑑𝑢 is an idiosyncratic error term. We cluster our standard errors at the house level.
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House price premium induced by Heat Pumps DID

Data National Wide Model 1 2 3 4
  • Coef. Of D (ATT, Price Premium)
0.0511 0.0349 0.0625 0.0708 P-vaule 0.000 0.000 0.000 0.000 Obs 853,142 634,952 634,952 853,142 Robust Std Err 0.00697 0.00965 0.01025 0.01104 95% CI 0.03745 0.01599 0.04246 0.04917 95% CI 0.0647 0.0538 0.08266 0.09245 R-sq (overall) 0.0483 0.0573 0.0027 0.0180 Groups/Houses 440,764 378,267 378,267 440,764 Building age control Yes Yes Yes Yes Other time-variant control No Yes Yes No Month-of-Year fixed effects Yes Yes Yes Yes Year fixed effects Yes Yes No No State-by-Year fixed effects No No Yes No County-by-Year fixed effects No No No Yes
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House price premium induced by Heat Pumps Robustness Check

Cross-sectional (post-treatment) data in conjunction with Nearest-Neighbor Matching
  • DID approach relies on intertemporal price
variation; however, the estimates would be biased if the hedonic gradient shifts over time (Kuminoff & Pope, 2014; Muehlenbachs et al., 2015).
  • Exact matching on city and transaction year
  • Propensity score matching on house features
  • Run OLS model
Data National Wide Model 1 2 3 4
  • Coef. Of D (ATT)
0.1709 0.0278 0.2632 0.1501 P-vaule 0.000 0.000 0.000 0.000 Obs 414,420 301,065 414,420 301,065 Robust Std Err 0.00364 0.00432 0.00357 0.0042 95% CI 0.16379 0.01933 0.25620 0.14177 95% CI 0.17810 0.03629 0.2702 0.15845 R-sq (overall) 0.0053 0.0723 0.2603 0.3026 Groups/Houses 414,420 301,065 414,420 301,065 House features control No Yes No Yes Year fixed effects No No Yes Yes City fixed effects No No Yes Yes
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The Lower Bound of House Price Premium

1.60% 0.27% 48.06% 39.76% 44.23% 52.26% 46.16% 44.91% 32.82% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% Solar panel Solar water heating Energy Star qualified clothes washer Energy Star qualified dishwasher Energy Star qualified clothes dryer Energy Star qualified refrigerator Energy Star qualified lightbulbs Energy Star qualified water heating Energy Star qualified windows The Percentage of Homes with Other Energy Efficient Measures in Heat Pump-Equipped Homes in the U.S. in 2015 Source: 2015 Residential Energy Consumption Survey Data Nation-wide average house sales price in ZTRAX data (2018$) 242407 Nation-wide Overall Price Premium (%) 7.08% Nation-wide Overall Price Premium (2018$) 17162.42 The average price of energy star qualified appliances clothes washer 1700 dishwasher 2890 clothes dryer 600 refrigerator 700 water heating 700 windows 700 The total value of energy efficiency appliances 7290 Lower bound of overall price premium (2018$) 9872.42 Lower bound of overall price premium (%) 4.07% The Computation of Lower Bound of Overall Price Premium
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The Distribution of House Price Premium

treated houses control houses New England 28 848 Middle Atlantic 164 29072 East North Central 97 28038 West North Central 111 47541 South Atlantic 11912 156387 East South Central 132 3501 West South Central 44 22917 Mountain 52 50825 Pacific 1671 101039 Division
  • Coef. Of D
P-vaule Obs South Atlantic 0.064 0.000 266,585 Pacific 0.052 0.064 174,910 Estimates using DID approach Sample size under the DID specification
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Correlation between price premium and environmental awareness

𝐹𝑗𝑢: the variable of interest, which would exert a marginal effect on the treatment effect.
  • Fig. An inverted “U” shaped relationship between local residents’ environmental
awareness (the percentage (%) of people who believe global warming is happening) and the price premium induced by heat pumps. 𝐽𝑜 𝑍 𝑗𝑡𝑢 = 𝛽𝐸𝑗𝑢 + 𝜄1𝐸𝑗𝑢 ∙ 𝐹𝑗𝑢 + 𝜄2𝐸𝑗𝑢 ∙ 𝐹𝑗𝑢 2 + 𝛾𝑊 𝑗𝑢 + 𝜒𝑗 + 𝜏𝑡 ∙ 𝜘𝑢 + 𝜈𝑢 + 𝜁𝑗𝑡𝑢 ሿ 𝜖𝐹[𝑍 𝑗𝑢|𝐹𝑗𝑢, 𝐸𝑗𝑢, 𝑊 𝑗𝑢, 𝜒𝑗, 𝜏𝑡 ∙ 𝜘𝑢, 𝜈𝑢 𝜖𝐸𝑗𝑢 = 𝛽 + 𝜄1 ∙ 𝐹𝑗𝑢 + 𝜄2 ∙ 𝐹𝑗𝑢 2
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SLIDE 15 Fig a. Lifetime fuel costs savings or extra expenditures associated with a switch to heat pumps Data Source: Vaishnav et al., 2018. Fig b. The distribution of price premium of houses with heat pump

Compare price premium with benefit/cost of switching to heat pumps

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SLIDE 16 16200 8900 8000* 1200
  • 920
280 15400 8200 8000* 1800
  • 90
1710
  • 2000
2000 4000 6000 8000 10000 12000 14000 16000 18000 Upper Bound of Price Premium Lower Bound of Price Premium Cost of Installing A Heat Pump Lifetime Fuel Cost Saving Lifetime Avoided Environmental Damage Toal Net Benefit Upper Bound of Price Premium Lower Bound of Price Premium Cost of Installing A Heat Pump Lifetime Fuel Cost Saving Lifetime Avoided Environmental Damage Toal Net Benefit South Atlantic Pacific *Note: the cost of installing a heat pump depends on the size of home and type of heat pump. The cost of installing an air- source heat pump ranges from 4000 to 8000 dollars, while a geothermal heat pump costs extra thousands of dollars since it requires underground installation. (unit: Dollars in 2018).

Compare price premium with benefit/cost of switching to heat pumps

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SLIDE 17 Information Program Property Tax Base Regional Investment

Policy Implication

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SLIDE 18

This research is supported by Alfred P. Sloan Foundation

Thanks for listening

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Q&A