Willingness to pay for green buildings post COVID-19 pandemic outbreak: Differences between high- and low-income areas and high- and low-price settlements

In this study, we observed the impact of the COVID-19 pandemic on green buildings through the lenses of intrinsic preferences and extrinsic conditions. In terms of intrinsic preferences, we inferred that the pandemic reinforced people’s preference for green buildings. We argued that the pandemic added value to green buildings by either causing panic or prompting residents to focus more on personal health. Therefore, when all other variables were controlled (i.e., income constraints), the pandemic should increase people’s WTP for green buildings. Specifically, the pandemic should increase people’s need to improve their physical and mental health.

However, the pandemic also negatively impacted people’s income. When people are no longer able to afford to act on their preferences, they will choose to purchase essentials (space) instead of environmental protection and personal health. Therefore, we inferred that the pandemic brought about extrinsic constraints for many people, limiting their demand and WTP for green buildings. Based on this income shock, we propose that the increase of people’s WTP for green buildings after the pandemic may not necessarily exist in certain areas and that the increased premium for green buildings would be more evident in areas less affected by extrinsic conditions.

Thus, we supposed that the effects of the pandemic on green buildings varied considerably in different districts. Districts with a higher average income might be affected more by intrinsic preferences and less by extrinsic conditions, leading to increased demand for green buildings after the pandemic outbreak. Districts severely impacted by the pandemic would also show increased demand for green buildings after the outbreak of the pandemic when income constraints were not prevalent.

In this study, we selected Taipei City as the research location for an empirical analysis. Taipei City is one of the earlier cities that promoted green buildings. It now has one of the most robust green building markets in Asia. The empirical results showed that districts with a higher average income had a higher preference for green buildings after the outbreak of the pandemic, particularly in high-priced housing clusters. Moreover, we found that in districts severely impacted by the pandemic, residents with lower income constraints showed a higher preference for improving physical and mental health and higher WTP for green buildings, resulting in an increased premium for green buildings. These results support the inferences of this article.

The results of this paper imply that although the pandemic has brought opportunities that are beneficial to the development of the green building market, the distribution of green buildings within a city may become increasingly uneven.

We propose several suggestions to address this issue:

1. Launch green recovery plans: the government can standardize certain green characteristics in new construction projects through subsidization so people do not have to pay to satisfy basic green needs. Alternatively, the social housing the government provides should have high standards for the characteristics of green buildings, and the government can incorporate its green building policy into its affordable housing projects (Zhao et al. 2018). These policies can enhance the effectiveness of government spending, expand the impact of fiscal spending (carbon reduction and energy conservation), and help industries adjust to more sustainable and eco-friendly business models as they recover from the pandemic.

2. Subsidize the construction of affordable green buildings: there are many different levels of green buildings in Taiwan. Green buildings with higher green building labels are costlier to build. During the pandemic, only residents living in high-income and high-price areas were willing to pay higher premiums for green buildings. This may result in green building builders only building high-priced housing in wealthy communities. Developers would be less willing to build affordable green buildings in areas with lower incomes since these buildings will command lower green building premiums. This situation is detrimental to the long-term development of the green building market. The government can subsidize the construction of affordable green buildings.

3. Construct green spaces in target areas: the government should open up green spaces around low-cost or densely packed buildings to increase the accessibility of green spaces and facilities to supplement the greening differences caused by the lack of green buildings in these areas. McCord et al. (2022) proposed a “housing market inequalities” phenomenon due to the pandemic. According to the results of this paper, governments should increase the construction of green spaces in areas with lower incomes and housing prices to avoid greening inequalities that are also occurring due to the pandemic.