2025 Theses Doctoral

Real Estate in Transition: Essays on Housing and the Decarbonization of Cities

Martinez, Candy M.

This dissertation examines how building decarbonization policies affect real estate markets, investment behavior, and welfare distribution. Motivated by New York City’s Local Law 97 (LL97), a pioneering building performance standard that caps carbon emissions from large buildings, it develops and quantifies a dynamic general equilibrium framework to evaluate policy design and its welfare implications. The central question is how landlords, tenants, and policymakers interact in markets where energy efficiency investments are costly but generate social environmental benefits, and how these interactions shape equilibrium rents, emissions, and welfare.

Chapter 1 constructs the baseline dynamic general equilibrium model with heterogeneous households and landlords. Households choose consumption, savings, and housing tenure (homelessness, renting low- or high-quality units, or owning), while landlords select investment and abatement strategies given operating costs and building quality dynamics. The model is calibrated to match observed housing market moments from the American Community Survey and the New York City Housing and Vacancy Survey.

Chapter 2 introduces policy counterfactuals to assess the effects of LL97 and alternative policy designs. Simulations compare the baseline economy with scenarios involving emissions caps, carbon taxes, and optimal tax rates chosen to achieve specific climate targets. The results reveal that while performance standards such as LL97 substantially reduce emissions, they impose heterogeneous rent and welfare effects across income groups. A more gradual, incentive-based carbon tax achieves comparable reductions at lower welfare cost, particularly for low-income renters.

Chapter 3 turns to the potential for office-to-residential conversions as an alternative pathway to urban decarbonization. Using detailed building-level data and a novel classification of office vintages by carbon intensity and retrofit feasibility, the analysis quantifies the share of the office stock that could be converted into housing under different regulatory and market conditions. The findings show that relaxing zoning constraints and providing targeted incentives could unlock a sizable pool of viable conversions, improving both housing affordability and emissions outcomes in dense urban cores.

Together, the chapters demonstrate that climate policy in real estate markets entails trade-offs between environmental gains and distributional outcomes. The dissertation concludes that policies integrating economic incentives, flexible compliance mechanisms, and adaptive land-use reforms can achieve emissions reductions more efficiently and equitably than rigid performance mandates.