Work

Air pollution and the housing market: Evidence from Germany’s Low Emission Zones

Year: 2025

Type: article

Abstract: This paper studies whether air quality improvements from driving restrictions are valued in the housing market, using comprehensive data on real estate prices in Germany. For identification, we exploit the staggered introduction of Low Emission Zones (LEZs) across German cities, restricting inner-city access for emission-intensive vehicles. We find that air quality improvements are reflected by roughly 2 percent higher apartment rents. The results are primarily driven by earlier LEZ implementations in areas with relatively higher pre-intervention pollution levels and in areas less dependent on cars. Our findings have important implications for planned changes to the emission intensity of the vehicle fleet, underscoring the potential implications of transitioning to cleaner transportation systems.

Source: Journal of Environmental Economics and Management

DOI: 10.1016/j.jeem.2025.103161

Authors: Henri Gruhl, Nicolas Volkhausen, Nico Pestel, Nils aus dem Moore

Institutions: RWI – Leibniz Institute for Economic Research, Vrije Universiteit Amsterdam, University of Duisburg-Essen, Maastricht University

Language: English

Topic: Housing Market and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Sustainable cities and communities

Open Access status: hybrid

Estimated APC paid: $3,620