Sunday, June 12, 2016

The role of public information in increasing homebuyers' willingness-to-pay for green housing: Evidence from Beijing

To explain the weak demand for green housing in Chinese cities, researchers point to the lack of reliable and accurate information to convince owners to invest, yet there is little concrete evidence that such information would in fact promote homebuyers' investment in green housing. We implement an information experiment in Beijing. We select two pairs of residential complexes – each pair has two complexes located in the same housing submarket, and one is green while the other is not. We ask the respondents' willingness to buy a new green housing unit, and, if yes, the price premium they are willing to pay. Then we show them an information card that documents that green apartments outperform their non-green counterparts in terms of several indoor environmental indicators, and then ask them the same two questions. We find that dwellers living in green complexes present a significantly higher initial willingness-to-pay for greenness, but this difference narrows significantly after our information treatment, as the non-green-complex dwellers' willingness-to-pay for greenness increases dramatically. This inspiring result suggests that Chinese urban households will be encouraged to purchase green housing if they are provided more reliable and concrete information.
The results from our experiment show that those who live in green complexes either have a higher preference for green buildings, or have more pre-experiment knowledge about green buildings (the official green certification system), or both. We do find that those green housing dwellers have a higher initial WTP for greenness (329 RMB/m2, compared to 225 RMB/m2 for non-green housing dwellers), even after controlling for household attributes. But their incremental WTP compared with non-green housing dwellers becomes much smaller after our information treatment since the net gain from such information is marginal for them (the after-information treatment WTP is 317 RMB/m2 and 285 RMB/m2 for green and non-green housing dwellers, respectively). Furthermore, the comparison of the certified and non-certified green complexes (both developed by MOMĪ›) reveals that there is little difference in these dwellers' WTP for greenness, either before or after our information treatment. Therefore the developer's “spillover” strategy is effective: it builds its “green” image by certifying some of its projects, and then enjoys the spillover effect to other projects under the brand name. Altogether, our experiment results highlight the important role of public information in promoting green housing development, and suggest that in addition to the green building certification, more concrete information is needed to improve dwellers' preference for green housing.
China Carless City 2
by  Li Zhang 1, Cong Sun 2, Hongyu Liu 1 and Siqi Zheng 1
Ecological Economics via Elsevier Science Direct
Volume 129, September 2016, Pages 40–49
by  Li Zhang 1, Cong Sun 2, Hongyu Liu 1 and Siqi Zheng 1
1. Hang Lung Center for Real Estate and Department of Construction Management, Tsinghua University, PR China
2.  School of Urban and Regional Science, Shanghai University of Finance and Economics, Shanghai 200433, PR China

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