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Property Tax Appraisal For Green Buildings: ENERGY STAR Certification In Texas
Hogan, Kevin G.
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This study investigates whether tax appraised values of commercial office buildings in major Texas cities are influenced by ENERGY STAR (ES) rating. Per square foot (PSF) tax appraised value of property improvements and certification ratings are used to determine whether higher levels ES rating (a numerical grade from 75 to 100) increase tax appraised values in the five most populated Texas cities - Austin, Dallas, Fort Worth, Houston, and San Antonio.Quantitative data on ES buildings in each selected city is obtained through the EPA and county tax assessor online resources. Data on 723 ES properties is collected and cleaned for the purpose of selecting properties that have accurate land areas, gross square footages, net square footages, land market values and improvement values. A total 370 ES office buildings with average improved tax appraised values of $42,654,608 are included in the cleaned dataset.Linear regressions are utilized to determine whether ES ratings effect tax appraised values of property improvements of 76 commercial office buildings built since 1995. A model that utilizes Year Built and city variables suggests that for every one-unit increase in ES rating, improved property value increases by $1.56 PSF. A second model that utilizes the more precise locational characteristic of zip codes similarly concludes that for every one-unit increase in ES rating, improved property value increases by $1.58 PSF. These models suggest that properties with higher levels of ES certification have higher PSF tax appraised value of property improvements.The research results allow conclusions about the extent to which ES certification is reflected in commercial real estate tax appraised values in Texas. This body of green building appraisal research provides taxing authorities with a more comprehensive understanding of how green building certification influences property values. This study is intended to serve as a foundational document to aid in the development of a best practice methodology for tax professionals to accurately appraise the market value of ES properties prior to comparable market transactions.