The value of basic building code insulation

We take advantage of unusually wide variation in thermal insulation in a sample of house sales to estimate the market value of basic code-level insulation. Insulation levels vary across the houses in our sample because standard practice in New Zealand was to build houses with no thermal insulation prior to implementation of insulation standards in 1978, and the extent of insulation retrofits varies across the sample. The estimated premium on an otherwise similar house insulated to code levels exceeds the cost of installation at construction: insulating to basic code levels at construction passes the market test. The premium instead reflects the higher cost of retro-fit installation. We suspect that price, cost, and performance risk have discouraged widespread code-level retro-fits in this market.

► We analyze house sales to estimate the market value of basic code-level insulation. ► Insulation varies across the sample due to relatively recent implementation of insulation requirements. ► The estimated market value of code-level insulation reflects the cost of insulation retrofits. ► Installation of code-level insulation at construction passes the market test. ► We suspect that the low rate of full insulation retrofits is explained by price, cost, and performance risk.