New Urbanism, Smart Growth and Green Buildings : The Impact of LEED Neighborhood Certification on Condo Prices

The US Green Building Council (USGBC) offers LEED certification for existing or new neighborhood developments that are in line with the new urbanism and smart growth concepts. We investigate whether LEED neighborhood certification 1) adds a premium to condo sales prices and 2) moderates the relationship of LEED building certification and sales prices. Using the Pearl District in Portland, Oregon as a laboratory and employing a second order spatio-temporal autoregressive model, we find no evidence that LEED neighborhood certification directly or indirectly affects sales prices. Our results suggest that, contrary to LEED building certification, LEED neighborhood certification fails to add value for condo buyers. We explain our findings with neighborhood delineation issues and the free rider problem as it relates to public goods. Interestingly, while condo buyers do not capitalize LEED neighborhood certification into sales prices, they appear to penalize the absence of it for condos in non-LEED certified buildings or neighborhoods in line with the dual factor theory. Our study has implications for developers and urban planners