This paper studies how greenhouse gas emissions (GHGe) mitigation policy (i.e., Greenhouse Gas Pollution Pricing Act or GHGPPA) impacts sellers’ and buyers’ behaviors in housing transactions due to these participant’s different reactions to the Act’s effect on housing transactions from increased carbon-price awareness. We find no net effect on selling prices after the GHGPPA although sellers (buyers) with greater carbon-price awareness list houses higher (value houses lower). The GHGPPA decreases the likelihood of house sales and lengthens listings time on the market in carbon-impacted areas. Our results are not driven by emission-intensive fuel usage as house heating inputs.

Combining granular data on temperatures across the continental United States with comprehensive listing-level data for residential properties and survey data on beliefs about climate change from 2000 to 2021, we examine the impact of exposure to local heat shocks on residential real estate prices. We first show that abnormally high local temperature leads to elevated belief in climate change. We find that exposure to local heat shocks results in a significant decrease in house prices, and this effect is more pronounced in communities concerned about global warming, during periods of increasing public attention to climate change and among counties heavily exposed to the risk of sea level rise. In contrast to the transaction price regression, we find no relation between abnormal temperature exposure and rental prices, suggesting that the observed temperature exposure discount is driven by concerns about long-horizon climate risks. Taken together, our results highlight the importance of uncertainty about climate change in affecting the real estate market.

We examine the role of local sustainability policies on commercial real estate, specifically, property-level financial performance. We create an index to measure the intensity of local environmental initiatives by state and estimate the effect on building level NOI, change in NOI, cap rates and mortgage default. We show that green policies are associated with higher valuations and lower initial cap rates at the time of loan origination. However, in terms of performance an increase in green policy intensity is associated with a significantly lower annual property level NOI. This in turn, leads to loans on those properties being more likely to experience severe delinquency. This is the case for both green regulations and green incentives, although the magnitude of these negative effects are larger for regulations. Furthermore, the negative impact of green policy intensity is mitigated for properties that have been recently renovated. The effects remain robust across property types, except for multifamily housing, lodging, and mixed-use properties which experience net positive NOI effects. While previous work has focused on the returns to property-level green renovations or certifications, results provide insight into how local sustainability policy may more broadly impact commercial real estate performance.