Source: MIT Center for Energy and Environmental Policy Research

Date Published: 03.15.2025

Link: Understanding Housing Market Responses to Stringent Energy Codes

Increasing energy efficiency in buildings is crucial to reducing carbon emissions and mitigating climate change. Massachusetts’ Green Communities Act of 2008, aiming for a 50% reduction in carbon emissions by 2030 and net-zero by 2050, mandates the Stretch Energy Code for eligibility for state funding. This code requires new residential constructions to meet stringent Home Energy Rating System (HERS) Index scores. While these requirements benefit the environment, they may increase construction costs, which in turn affect housing production and affordability. Using the staggered municipal adoption of the Stretch Energy Code to tease out causal relationships, we analyze the effects of the Stretch Energy Code on housing quantity and price across municipalities in Massachusetts. The results indicate that more energy-efficient single-family properties command a sales price premium of 4.0%, and the adoption of the Stretch Energy Code is associated with a decrease in the quantity of new single-family housing starts. Approximately 45.5% of the price increase is attributed to a higher willingness to pay for energy-efficient homes, with the remainder due to a reduced housing supply.