Energy Star Homes Less Likely to Default

A blog about business and economics.
March 19 2013 2:36 PM

Energy Star Homes Less Likely to Go Into Default

Emily Badger has a fascinating piece about new research indicating that energy efficient Energy Star homes are less likely to enter default and foreclosure than conventional homes. When I first saw this study being touted by some green types on Twitter I thought the finding was based on some obvious fallacy, but Badger writes that the researchers "controlled for the size and age of the houses, neighborhood income, climate, home value, local unemployment rates, utility prices and borrower credit scores, among other variables."

In other words, this really is a correlation between energy efficiency and default risk not just something about energy efficient homes being built in more economically vibrant places.

One possibility here is that energy efficiency is saving people tons of money, and thus they can pay off their mortgage. Another possibility would be that efficiency is a correlate of some kind of anti-default personality characteristic—like the kind of people who remember to consider the energy efficiency of their house are more far-sighted than average. Either way, the thinking here is that the energy efficiency of a home should enter into assessments of creditworthiness for mortgage purposes.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.