Building's Energy Efficiency and Residential Mortgage Default Behavior: Evidence from Italy and Germany

Abstract

The aim of this thesis is to investigate the relation between mortgage default behavior, building’s energy efficiency and other sustainability features. The study focuses on two European countries, Italy and Germany. To this end, I constructed a dataset for each country by combining borrower-level mortgage information with selected variables related to building’s energy efficiency. By employing a logistic regression and a linear regression, I tested the effects of several variables on the probability of mortgage default and the equity at default, i.e. the difference between the value of the house and the value of the outstanding debt. The results show that building’s energy efficiency and investments made to improve the quality of the property imply a lower likelihood of mortgage default and increase equity at default.