Evidence of the Effects of Water Quality on Residential Land Prices

Abstract

We use hedonic techniques to show that water quality has a significant effect on property values along the Chesapeake Bay. Mindful of the limitations of using hedonic methods for welfare analysis, we calculate the potential benefits from an illustrative (but limited) water quality improvement. Past hedonic studies have almost entirely ignored the potential for omitted variables bias-the possibility that pollution sources, in addition to emitting undesirable substances, are likely to be unpleasant neighbors. We discuss the implications of this oversight, and we provide an application that addresses the problem head-on.

A room with a view—A valuation of the Mediterranean Sea view

“…Most of the environmental and natural resource applications of the hedonic price model relate to housing prices. For example, air pollution (Smith and Huang, 1995), water pollution (Leggett and Bockstael, 2000) and landscape (Geoghegan, Wainger and Bockstael, 1997) were evaluated based on differences in housing prices and level of pollution or distance from the landscape. In the present study, the existence of a hotel room market next to the Mediterranean Sea allows the use of a hedonic price analysis to evaluate the Mediterranean Sea view as an ecosystem service.…”

Impacts of changes in water quality on recreation behavior and benefits in Finland

“…Water areas in the nearby living environment and their quality have been found to be a significant factor in hedonic property price studies (e.g. Leggett and Bockstael 2000, Michael et al 2000, Tyrväinen 1997) and in landscape preference studies (e.g. Dramstad 2006).…”

The Amenity Value of English Nature: A Hedonic Price Approach

“…In the forty years that elapsed since this pioneering contribution, there have been dozens of studies estimating the price impacts of a wide range of other environmental amenities such as water quality (Walsh et al, 2011;Leggett and Bockstael, 2000;Boyle, Poor and Taylor, 1999), preserved natural areas (Correll, Lillydahl, and Singell, 1978;Lee and Linneman, 1998), wetlands (Doss and Taff, 1996;Mahan, Polasky, and Adams, 2000), forests (Garrod and Willis, 1992;Tyrvainen and Miettinen, 2000;Thorsnes, 2002), beaches (Landry and Hindsley, 2011), agricultural activities (Le Goffe 2000), nature views (Benson et al, 1998;Patterson & Boyle, 2002;Luttik, 2000;Morancho, 2003), urban trees (Anderson and Cordell, 1985;Morales, 1980;Morales, Micha, and Weber, 1983) and open spaces (Cheshire and Sheppard, 1995Sheppard, , 1998Bolitzer and Netusil, 2000;Netusil, 2005;McConnell and Walls, 2005). Disamenities such as road noise (Day at al., 2006;Wilhelmsson 2000) have also been investigated.…”