Aligning climate and housing goals: a data-driven approach to support equitable decarbonisation policy design

Abstract Building energy codes are a crucial policy tool for decarbonising the built environment, but their economic impacts on housing affordability matter for both decarbonisation and social equity. This paper investigates the distributional consequences of energy codes on single-family housing across neighbourhood income levels. Using the staggered, municipal-level adoption of the Massachusetts Stretch Energy Code as a quasi-natural experiment, we estimate the policy’s causal effects on single-family housing prices and new construction. On average, adopting a more stringent energy code leads to only a modest increase in housing prices and reduction in new housing supply. Critically, these effects are concentrated in low/median-income municipalities with low property values, exacerbating affordability pressures. The key mechanism is the relative burden of construction costs. In these jurisdictions, the land represents a smaller share of home value, and compliance costs constitute a larger fraction. While energy codes are an efficient and fundamental tool to reduce carbon emissions at a low cost, their benefits and burdens are not equally distributed. Achieving a just energy transition requires pairing these standards with zoning reform, targeted financial incentives, expedited permitting and workforce training to mitigate regressive effects on lower-income households in the near term; with careful policy design, climate and housing equity goals are not irreconcilable.