How Does Mandatory Energy Efficiency Disclosure Affect Housing Prices?

Since 2012, the United States has witnessed explosive growth in mandatory energy efficiency disclosure policies, which aim to address market failures in housing. I examine one such policy and find increased capitalization of features that buyers are less likely to observe, but no impacts for features that buyers usually observe. A standard deviation increase in less-observable energy efficiency corresponds to a $5,300 increase in house prices. A dollar of annual savings from less observable energy efficiency is associated with a $19 increase in house prices due to the policy. This translates to none-to-full capitalization of less-observable energy efficiency at discount rates upward of 5.6%. My findings suggest that policy makers can reduce administrative burdens by targeting disclosure of less observable energy efficiency features. Furthermore, my findings call into question the usefulness of common instruments like the Home Energy Score for disclosure policies, as these mostly provide information on more observable features.