Dennis Guignet

What Do Property Values Really Tell Us? A Hedonic Study of Underground Storage Tanks

Hedonic property value models are widely used but are susceptible to potentially invalid conjectures based on the assumed measure of environmental quality. This paper focuses on an application where this is of particular concern: leaking underground storage tanks. I estimate a hedonic model using quasi-experimental and spatial econometric techniques. Similar to previous studies, I examine how house prices vary with distance to the disamenity. This approach yields little evidence that prices are adversely impacted. However, to better measure risks I utilize home-specific data on groundwater well tests and correspondence from regulators, and find an 11% depreciation when households are well informed. (JEL Q51, Q53)

Can Property Values Capture Changes in Environmental Health Risks? Evidence from a Stated Preference Study in Italy and the UK

Hedonic property value models are often used to place a value on localized amenities and disamenities. In practice, however, results may be affected by (i) omitted variable bias and (ii) whether homebuyers and sellers are aware of, and respond to, the assumed environmental measure. In this paper we undertake an alternative stated preference (SP) approach that eliminates the potential for unobserved confounders and where the measure of environmental quality is explicitly presented to respondents. We examine how homeowners in the United Kingdom and Italy value mortality risk reductions by asking them to choose among hypothetical variants of their home that differ in terms of mortality risks from air pollution and price. To our knowledge this is the first stated preference study examining respondents’ willingness to pay for properties using a quantitative and clearly specified measure of health risks. We find that Italian homeowners hold a value of a statistical life (VSL) of about €6.4 million, but UK homeowners tend to hold a much lower VSL (€2.1 million). This may be due to the fact that respondents in the UK do not perceive air pollution where they live to be as threatening, and actually live in cities with relatively low air pollution levels. Exploiting part of our experimental design, we find that Italian homeowners value a reduction in the risk of dying from cancer more than from other causes, but UK respondents do not hold such a premium. We also find that those who face higher baseline risks, due to higher air pollution levels where they live, hold a higher VSL, especially in the UK. In both countries, the VSL is twice as large among individuals who perceive air pollution where they live as relatively high.

The Implicit Price of Aquatic Grasses

ABSTRACT Submerged aquatic vegetation (SAV) in the Chesapeake Bay is well below half of its historic levels, largely due to excessive nutrient and sediment loads degrading water quality. SAV provides important ecosystem functions, many of which are beneficial to local residents. To understand the implicit value residents place on SAV and the ecosystem services it provides, we undertake a hedonic property value study using residential transactions in 11 Maryland counties adjacent to the Chesapeake Bay. These data are matched to highresolution maps of SAV coverage. We pose a quasi-experimental comparison and examine how the prices of homes near the waterfront vary with the presence of SAV. On average, waterfront and near-waterfront homes within 200 meters of the shore sell at about a 6.5% premium when SAV is present. Applying these estimates to the 185,000-acre SAV attainment goal suggests total property value gains on the order of

Impacts of Ground Water Contamination on Property Values: Agricultural Run-off and Private Wells

436 million. JEL Codes: Q51, Q53.

Can Property Values Capture Changes in Environmental Health Risks? Evidence from a Stated Preference Study in Italy and the United Kingdom: Can Property Values Capture Changes in Environmental Health Risks

Few studies have examined the impacts of ground water quality on residential property values. Using a unique data set of well tests, we link residential real estate transactions to home-specific contamination and conduct a hedonic analysis of sales in Lake County, Florida, where pollution concerns relate primarily to agricultural run-off. We find that recent testing and contamination of ground water there correspond to a 2–6 percent depreciation in home values, an effect that diminishes over time. Focusing on nitrogen-based contamination, we find that prices decline mainly when concentrations exceed the regulatory health standard, suggesting as much as a 15 percent depreciation at levels twice the standard.

A HEDONIC ANALYSIS OF THE IMPACT OF LUST SITES ON HOUSE PRICES

Hedonic models are a common nonmarket valuation technique, but, in practice, results can be affected by omitted variables and whether homebuyers respond to the assumed environmental measure. We undertake an alternative stated preference approach that circumvents these issues. We examine how homeowners in the United Kingdom and Italy value mortality risk reductions by asking them to choose among hypothetical variants of their home that differ in terms of mortality risks from air pollution and price. We find that Italian homeowners hold a value of a statistical life (VSL) of €6.4 million, but U.K. homeowners hold a much lower VSL (€2.1 million). This may be because respondents in the United Kingdom do not perceive air pollution where they live to be as threatening, and actually live in cities with relatively low air pollution. Italian homeowners value a reduction in the risk of dying from cancer more than from other causes, but U.K. respondents do not hold such a premium. Lastly, respondents who face higher baseline risks, due to greater air pollution where they live, hold a higher VSL, particularly in the United Kingdom. In both countries, the VSL is twice as large among individuals who perceive air pollution where they live as high.