High-quality water resources provide a wide range of benefits, but the value of water quality is often not fully represented in environmental policy decisions, due in large part to an absence of water quality valuation estimates at large, policy relevant scales. Using data on property values with nationwide coverage across the contiguous United States, we estimate the benefits of lake water quality as measured through capitalization in housing markets. We find compelling evidence that homeowners place a premium on improved water quality. This premium is largest for lakefront property and decays with distance from the waterbody. In aggregate, we estimate that 10% improvement of water quality for the contiguous United States has a value of $6 to 9 billion to property owners. This study provides credible evidence for policymakers to incorporate lake water quality value estimates in environmental decision-making.

This study uses Zillow's ZTRAX property transaction database to investigate variation in hedonic price effects of water clarity on single-family houses throughout the United States. We consider five spatial scales and estimate models using different sample selection criteria and model specifications. Our results indicate considerable spatial heterogeneity both within and across the four U.S. Census regions. However, we also find heterogeneity resulting from different types of investigator decisions, including sample selection and modelling choices. Thus, it is necessary to use practical knowledge to consider the limits of market areas and to investigate the robustness of estimation results to investigator choices. (JEL Q51