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

This paper studies whether people's perception of improvements in local air quality are reflected in the housing market based on comprehensive data on real estate prices from Germany. Using a quasi-experimental research design, we exploit the staggered introduction of Low Emission Zones (LEZs) across German cities, lowering urban air pollution by limiting the access of high-emitting vehicles. We find that residents value the presence of LEZs, reflected by roughly 2% higher apartment rents. Estimates are similar, albeit smaller in magnitude, for properties for purchase. The results are driven by earlier LEZ implementations and LEZs in areas with relatively higher pre-intervention pollution levels.