Internal supervisor: Lory Barile

External supervisor: a member from BoE

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The Bank of England offers the following topic for 2024/25. Please indicate your preference when completing the application formLink opens in a new window.

Topic: Understanding the house price externalities of a Minimum Energy Efficiency Standard (MEES)

Summary

Motivation:

The Minimum Energy Efficiency Standard (MEES) was introduced to improve energy efficiency in privately rented properties. However, recent research has revealed an unintended consequence: a decline in property prices, not only for sub-standard properties (Ferentinos et al., 2023) but also for neighbouring above-standard properties.

The latter negative externality may be driven by a concentration of sub-standard housing in a neighbourhood. Specifically, the devaluation of sub-standard housing could attract lower-income residents to the area. These residents may have a lower demand for neighbourhood amenities or may not invest in regular property maintenance. As a result, the image of the surrounding area may change, depressing prices for neighbouring properties that were not directly affected by the MEES.

Objectives:

This project aims to investigate the underlying mechanisms driving this negative externality, potentially looking at changes in the composition of homeowners and migration patterns.

Expected analyses:

Data Identification and Sourcing: To that end, the student is expected to identify and gather relevant datasets to explore mechanisms (migration, demographic composition) with guidance from their co-supervisors.

Data Integration: The student will then need to match these data with data on house prices and energy performance certificates (UCL, 2022).

Econometric Analyses: They will then need to conduct an econometric analysis (e.g. Difference-in-Difference) to uncover the exact mechanisms behind the observed negative externality.

 Expected outcomes:

A clear understanding of the mechanisms driving the negative externality of MEES on property prices.

 Policy recommendations:

Insights that can inform policymakers on how to mitigate the unintended economic impacts of environmental regulations.

 References

Ferentinos, K., Gibberd, A. and B. Guin (2023).

Stranded houses? The price effect of a minimum energy efficiency standard, Energy Economics, Volume 120.

UCL (2022). House price per square metre in England and Wales. Source: https://data.london.gov.uk/dataset/house-price-per-square-metre-in-england-and-walesLink opens in a new window