Friday, 26 February 2021 19:58

Buildings’ Energy Efficiency and the Probability of Mortgage Default: The Dutch Case

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Billio M, Costola M, Pelizzon L, Riedel M

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  • Published in: SAFE Working Paper No. 261 University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 06/WP/2020
  • Year: 2020
  • Abstract: We investigate the relation between buildings’ energy efficiency and the probability of mortgage default. To this end, we construct a novel panel dataset by combining Dutch loan-level mortgage information with provisional building energy ratings that are provided by the Netherlands Enterprise Agency. By employing the logistic regression and the extended Cox model, we find that buildings’ energy efficiency is associated with lower likelihood of mortgage default. We also show that energy efficiency provides a further mitigation of default risk for borrowers with a lower income potentially because of the savings coming from lower utility bills, which have a major impact on the borrower with less disposable income. The results hold for a battery of robustness checks.
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Monica Billio

Full Professor in Econometrics - Ca’ Foscari University of Venice, Department of Economics

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