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Green Dividends vs. Brown Discounts: What Our Research Reveals About Energy Efficiency in Real Estate
SkenarioLabs’ Green Dividends Research Paper supported by the Department for Energy Security and Net Zero’s Green Home Finance Accelerator (GHFA)
The push for energy efficiency in residential real estate is often framed as a win-win: homeowners can reduce their carbon footprint while seeing an increase in property value—what some call a “Green Dividend.” But is this dividend real, or is the market more focused on penalising inefficient homes instead?
Our latest research, supported by the Department for Energy Security and Net Zero’s Green Home Finance Accelerator (GHFA), sheds light on this question. After analysing extensive residential property data from across England and Wales, we found that a Green Dividend is largely absent—but a Brown Discount is very real.
What We Found: The Myth of the Green Dividend
Despite widespread belief that energy-efficient homes command a price premium, our study found no strong evidence that higher EPC (Energy Performance Certificate) ratings consistently increase property value. The expectation that buyers are willing to pay extra for well-rated properties does not hold up across the data.
One reason for this may be that energy-efficient homes often come bundled with other desirable features—like modern construction, larger square footage, or premium locations. These factors may be driving up prices rather than the EPC rating itself.
The Brown Discount is Here to Stay
While green homes may not always command a premium, the reverse is not true: homes with poor energy performance (EPC ratings of E, F, or G) consistently suffer a market penalty. Buyers are increasingly wary of inefficient homes due to:
- Higher energy costs – Less efficient properties cost more to run, making them less attractive.
- Regulatory risk – Future government policies may impose stricter energy efficiency requirements, adding financial burdens on owners of low-rated properties.
- Changing buyer priorities – While the shift is slow, there is growing awareness of energy efficiency as a factor in home purchases.
Regional Differences: The London Exception
One of the most striking findings was the regional variability in the impact of EPC ratings. In some areas, energy efficiency significantly affects home values, while in London, energy efficiency had little to no impact. The high demand and fast turnover of London’s housing market seem to overshadow energy concerns.
What This Means for Homeowners and Investors
- Energy efficiency won’t guarantee a price boost, but neglecting it could lead to financial penalties.
- Regulatory changes could widen the Brown Discount—stricter EPC requirements may make inefficient homes even less desirable.
- Market forces vary by region, so local conditions should guide energy efficiency investments.
While the Green Dividend remains elusive, the growing Brown Discount signals a shift in how buyers and investors perceive energy performance. As sustainability regulations tighten, the market penalty for inefficient homes could become even steeper.
