The European Commission has significantly increased its focus on sustainability issues and the growing energy deficit. Residential consumption has been identified as one of the most energy-intensive segments, prompting the Commission to propose an Energy Performance of Buildings Directive. This directive aims to establish minimum standards for buildings to be met within specified timeframes. In this context, it is crucial to identify and address all potential drawbacks of such measures, ensuring that not only environmental but also social and economic aspects of sustainability are considered. This paper examines the impact of a fiscal incentive, called the Superbonus, implemented by the Italian government to promote sustainable investments and facilitate the recovery of the real estate sector following the pandemic. The work contributes to the growing literature on climate policies by focusing on the indirect effects on households and welfare through the analysis of the allocation of government resources across geographical areas and its impact on the housing market. The study employs a difference-in-differences approach with a continuous treatment variable to analyze the impact of the Superbonus on the real estate market, using data from Milan’s residential market over the period 2016–2021. The results indicate that, while the fiscal incentive may have produced undesired welfare effects, the impact on the housing market led to a more equitable redistribution, albeit limited to those who already owned properties. The paper disentangles the main underlying mechanisms behind these effects, contributing both from an academic perspective and offering several political insights.

Keywords: climate policy; housing; welfare; fiscal incentives