Buildings’ Energy Efficiency and the Probability of Mortgage Default: The Dutch Case

43 Pages Posted: 18 May 2020

See all articles by Monica Billio

Monica Billio

Ca Foscari University of Venice - Dipartimento di Economia

Michele Costola

Ca' Foscari University of Venice

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE; Ca Foscari University of Venice

Max Riedel

Leibniz Institute for Financial Research SAFE

Date Written: May 15, 2020

Abstract

We investigate the relation between buildings’ energy efficiency and the probability of mortgage default. To this end, we construct a novel panel dataset by combining Dutch loan-level mortgage information with provisional building energy ratings that are provided by the Netherlands Enterprise Agency. By employing the logistic regression and the extended Cox model, we find that buildings’ energy efficiency is associated with lower likelihood of mortgage default. We also show that energy efficiency provides a further mitigation of default risk for borrowers with a lower income potentially because of the savings coming from lower utility bills, which have a major impact on the borrower with less disposable income. The results hold for a battery of robustness checks.

Keywords: Mortgages, Energy Efficiency, Credit Risk

JEL Classification: G21

Suggested Citation

Billio, Monica and Costola, Michele and Pelizzon, Loriana and Riedel, Max, Buildings’ Energy Efficiency and the Probability of Mortgage Default: The Dutch Case (May 15, 2020). SAFE Working Paper No. 261, University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 06/WP/2020, Available at SSRN: https://ssrn.com/abstract=3601723 or http://dx.doi.org/10.2139/ssrn.3601723

Monica Billio

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

HOME PAGE: http://www.unive.it/persone/billio

Michele Costola

Ca' Foscari University of Venice ( email )

Cannaregio 873
Venice, 30121
Italy

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, D-60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

HOME PAGE: http://www.safe-frankfurt.de

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

Max Riedel (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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